Key Takeaways
- Shares in food delivery giant DoorDash moved sharply lower in premarket trading on Thursday after the company reported a wider-than-expected net loss.
- The company said gross order value growth in its U.S. restaurant segment decelerated slightly on a sequential basis.
- DoorDash shares may find a zone of support from prior price action and the 50% Fibonacci retracement level between $105 and $110.50.
Food delivery giant DoorDash (DASH) posted a wider-than-expected loss for the first three months of the year amid moderating demand in its core U.S. restaurant market, sending its shares tumbling more than 12% in premarket trading Thursday morning.
The company reported a first-quarter net loss of 6 cents a share, compared with the 3-cents-per-share loss Wall Street had expected. However, revenue grew 23% from a year earlier to $2.51 billion, topping estimates of $2.45 billion.
While gross order value in the period climbed 21% to $19.2 billion, the company said growth in its core U.S. restaurant segment decelerated slightly on a sequential basis. Moreover, its current-quarter gross order value midpoint guidance of $19.2 billion came in slightly below $19.22 billion modeled by analysts.
Company Has Expanded Beyond Food Delivery
In an effort to boost delivery orders on its platform, the online food-delivery provider has recently expanded outside the restaurant market to now include grocery and retail delivery. “We continued to increase selection on our DoorDash Marketplace and our Wolt Marketplace in Q1 2024, both inside and outside of the restaurant category,” the company said it its earning’s statement.
However, DoorDash faces an increasingly crowed delivery marketplace, competing with larger rivals, including Uber Technologies (UBER) in the restaurant vertical, and e-commerce giant Amazon (AMZN) in the grocery space. It has also encountered challenges from higher minimum wages recently mandated for delivery drivers in Seattle and New York, though the company said wage changes in those two markets reduced total orders by less than 1% in the quarter.
“DoorDash will need to demonstrate growth strategies that can make up for the risk of declining volumes from restaurants in the U.S., as well as pressures from labor expenses,” Northcoast Research analyst Jim Sanderson told Reuters following the earnings release.
Area to Watch Amid Earnings-Related Selling
After finding support at the 200-day moving average in late October, the DoorDash share price trended consistently higher for the next five months before topping out in late March. Since that time, the stock has undergone a retracement, with the price recently consolidating below the 50-day MA leading into the company’s quarterly results.
Amid Thursday’s anticipated earnings-driven selling pressure, investors should monitor the area on the chart between $105 and $110.50, where the shares may find a zone of support from price action dating back to January that roughly aligns with the 50% Fibonacci retracement level.
DoorDash stock was down 12.1% at $111.99 in premarket trading at around 7:00 a.m. ET. The stock has doubled over the past year.
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