Starbucks vs DoorDash Stock: Which Is Best?

Starbucks Corporation (NASDAQ:SBUX) and DoorDash Inc (NYSE:DASH) were perfectly placed during the pandemic to serve a need for curbside pickup, delivery, and other socially distant measures. Each company has a completely different business model though, and that means it can be hard for investors to know which to choose.

So, which is the better investment between Starbucks vs DoorDash stock?

Starbucks Growth and Brand

Food delivery services have been on a tear over the past year or so. Starbucks has even opened new stores at a time when so many brick and mortar locations shut down. 

Starbucks is a worldwide brand that’s recognized in many languages. It expects the fiscal year of 2022 to experience 20 percent growth, and that’s expected to growth another 10 to 12 percent in 2023 and 2024. That’s an impressive growth trajectory for a company that’s already one of the largest in the world.

There are 32,660 Starbucks locations around the globe, and the company had nearly doubled its size over the past decade. Revenue projections going forward suggest that Starbucks can sustain its upward momentum for the foreseeable future.

And despite an earnings blip into the red in 2020, SBUX is on track to deliver higher earnings per share going forward too now.

DoorDash Top Line and Bottom Line

Analyst growth estimates for DoorDash go as high as 33 percent or even triple-digit growth in percentage terms over the next two years. Of course, vaccines being issued are slowing the platform’s overall growth, and customers could be slim picking moving forward.

Even 33 percent growth would translate to about $33 billion in total sales though earnings are forecast to stay in the red for some time still.

One of its biggest problems is that the company relies on gig workers, and some states like California are pushing legislation that could make that more expensive. If employment starts to pick up, the company could lose some of its drivers. 

On the plus side, the company has partnerships in place with restaurants and grocery stores like Safeway. Those B2B partnerships should sustain a predictable revenue stream.

Why DoorDash Is a Buy

DoorDash recently went public in late 2020 and has a market capitalization hovering between $40 billion and $50 billion. But it hasn’t earned a profit because of its high operating expenses.

It turned in a -$149 million net loss in the first three quarters of 2020. Much of its spending went towards building its logistical network. This delivery logistics is the company’s bread and butter, enabling it to compete with companies like Dominos and even Amazon (AMZN) to a point.

And investors believe that the company will continue to grow as it adds new cities and onboards restaurants. But the road ahead is filled with bumps.

Risks of Investing in DoorDash

The biggest risk to DoorDash is the competition. Delivery is a stiff market, and giants like Uber (UBER) are in the mix, along with GrubHub and others. DoorDash needs to work hard to snag partnerships that these rivals don’t have.

And there’s the risk of losing its labor force (or of it getting more expensive). Because DASH doesn’t offer benefits, people may choose to stop driving for the company. Or it could get forced to provide benefits by state legislation.

The company hasn’t made any money – neither has Uber nor Lyft (LYFT). This means the business model may be flawed, even though the service appears useful. Ultimately, if you invest in DoorDash, you could be jumping in too late because it’s overinflated.

If the company can’t start translate revenues into profits, a cash crunch becomes a real threat long-term. That’s why some investors prefer Starbucks.

Starbucks Is a Proven Investment

Starbucks is a longstanding restaurant concept that has expanded quickly around the world. The company serves coffee and tea, but it also has food. And besides standalone stores, it’s integrated into many grocery stores, bookstores, and more.

The coffee seller may have had a rare earnings miss into the red in 2020, but it has rebounded well. And once things go back to normal, it’s not at risk of deflating the way DoorDash could.

Investors also love the Starbucks dividend. The company pays a 1.60 percent dividend. It’s not huge but it is attractive enough to woo conservative investors. With a market cap of around $135 billion, there’s room for growth and profits. And it’s expanding into China, where it should see a boost.

But there’s a drawback to investing in Starbucks that must be considered.

Starbucks Stock Has A Fly In The Ointment

Despite everything it’s doing right, Starbucks still has some obstacles to overcome. Its biggest problem is that it’s susceptible to commodity price fluctuations. That means the price of coffee beans can greatly impact the company’s overhead and cause profits to get dropped. And it’s getting more competition by the minute.

Giant drink companies like Coke (KO), Dunkin and Pepsi (PEP) are trying to elbow their way into the coffee giant’s lane, and they’re doing a decent job. This has caused the stock to somewhat fluctuate and be volatile recently.

However, don’t underestimate this Seattle-based beverage chain. It still has a big retail footprint and distribution channels that can be leveraged to continue its path moving forward. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.