NVIDIA and DoorDash reviews

In 2021, the meal delivery company was doing surprisingly well, even though as the U.S. economy recovers, more and more people are choosing to eat at restaurants rather than at home. Let’s take a closer look at the company to see if this paper is worth buying in 2022.

Pandemic like a tailwind

This food delivery service was one of the beneficiaries of the pandemic. Because of the lockdowns, people were forced to stay home, and the food delivery service became very popular.

DoorDash benefited from this situation in two ways. Firstly, people used the service. Secondly, in order not to lose their customers, restaurants contacted the company to deliver food to all comers.

DoorDash took this chance and partnered in a new direction. In addition to restaurants, the issuer began delivering goods from grocery stores, mini-markets, and flower stores. The demand for the service has helped the issuer accelerate revenue growth from $291 million in 2018 to $2.9 billion in 2020. By the end of 2021, DoorDash wants to reach even more significant figures.

It was not without losses, though. The food delivery service lost $313 million in the first nine months of 2021, more than double the loss it made in the third quarter of 2020.

A small price to pay for convenience

DoorDash has surprised many by showing a meteoric rise over the past few years. DASH increased revenue first between 2018 and 2019 and then tripled it in 2020. What’s more, the growth momentum continued into 2021.

For the three quarters of 2021, the issuer’s revenue rose to $3.6 billion, an 89% increase over the same period in 2020. The growth is impressive, given that the restaurant business has reopened its doors to the public.

At the heart of this growth is the convenience the service offers its customers, who feel it is worth the money they pay.

In this situation, DoorDash not only needs to remain profitable but also to show growth. The latter is not going well for it. Despite revenue growth, profits have remained between 2% and 3% for the past five quarters.

Risks for DoorDash

In Q3 2020, DoorDash saw a 268% increase in revenue. It was the peak for this indicator. In subsequent quarters, revenue growth began to slow down. In Q3 2021, it grew by only 45%.

To boost sales growth, DoorDash began partnering with vendors outside the restaurant business. At the end of September 2021, the issuer had a contract with more than 500,000 vendors worldwide.

The food delivery service has expanded its range. Now, it delivers not only food from restaurants but also groceries, convenience goods, pet products, and much more.

While ordinary everyday people pay for DoorDash delivery, the issuer earns revenue from restaurants and stores by taking a percentage of the cost of customer orders.

Adding new categories, like grocery delivery, can also increase the average cost of an order.

In Q3, the gross order value rose 44% to $10.4 billion. Management plans to reach a gross order value of $10.7 billion.

Should you buy or sell DoorDash shares?

DoorDash is projected to report $1.28 billion and a loss per share of $0.27. If the forecast matches the numbers, it will correspond to the growth of 32.10% and 89.88%, respectively, compared to the same period in 2020.

Despite stable business and prospects (the total market is estimated at $4.1 trillion), stocks have been showing declines for the past three months. The drawdown has already reached 48%. Because of this decline, the paper is traded at a price-to-sales ratio of 7.5. It is a step away from the lows the stock has ever reached.

If the issuer can expand its delivery range, it could be a catalyst that will stop the further decline.

The relatively inexpensive valuation, positive cash flow, and huge market opportunities make DoorDash securities worthy of our attention.

In November 2021, shares of Nvidia (NVDA) reached a new all-time high, reaching $346. The paper did not go further than that mark because, around the same time, the U.S. regulator said it was ready to raise interest rates in 2022, which put downward pressure on the shares. Since that moment, the asset has been in the hands of sellers. We will try to answer below whether to expect the paper to return to growth in the coming quarters and whether it is worth investing in it.

History repeats itself

Those who follow this company had already seen something similar in 2018 when the Fed raised interest rates four times. Then, worldwide demand for graphics cards declined, and due to oversupply, graphics processor prices flew down, resulting in Nvidia stock going into a correction in the last quarter of 2018.

Four years ago, two factors caused a decline. Now there is only one – tightening of monetary policy in the U.S.

The demand for microchips and graphics cards is now high. It gives investors hope that the period of stagnation and pullback will not last long. As soon as investors see that the impact of the regulator on Nvidia’s business is not so detrimental, Nvidia’s securities will go back up. By the way, investors, who four years ago were not afraid to invest in this company, are now in a good profit.

Don’t be afraid of cycles

Where there are great opportunities, there are also great risks. Let’s look at them in more detail.

The chipmaker is a leading supplier of powerful GPUs to leading cloud computing companies. The growth of IT has contributed to the rapid growth of Nvidia’s performance in recent years. In the first nine months of the fiscal year 2022, data center revenue was up 50 percent over 2021, which couldn’t help but affect Nvidia’s financial position.

However, the investor should take into account that the IT sphere is cyclical, and the upswing can be followed by a pullback. For example, in Q1 2020, the issuer reported a 31% decline in total revenue compared to the same period in 2019.

However, these declines should not deter investors from buying the paper. Nvidia has a diversified business, and weak reports from one of the company’s segments are usually quickly offset by successes from other areas. A longer decline is only possible when the overall market situation is not favorable.

NVIDIA and DoorDash reviews

Nvidia Omniverse and metaverses

The year 2021 was the official birth year of the metaverse as a trend. In 2021, Mark Zuckerberg announced the creation of his metaverse, after which other techno giants rushed into this area. Although, as a concept and as an area to work in, metaverses were created a long time ago.

Nvidia could not pass by such an attractive opportunity and took part in this race.

In November 2021, NVDA announced the creation of Omniverse, a special platform for working in a virtual environment. According to the company, this platform is an important mechanism by which metaverses can be built. For example, Lockheed Martin is testing forest firefighting on the platform. Other companies use metaverse to create digital twins for buildings and businesses.

Unsuccessful deal

It has now been officially announced that Nvidia refuses to acquire Arm from Softbank. The reason for the breakdown of the agreement was serious regulatory problems. They had been preparing for the deal since September 2020. At that time, the market value of Arm was $40 billion in cash and shares. Then the price went up, reaching $80 billion.

This deal was questionable from the very beginning. Now we will explain in detail why. Arm designs chips using the ARM architecture. These chips are used in almost all mobile devices based on Android and iOS. Arm has always maintained neutrality towards those who use its products. If the deal had taken place, the situation would have changed. Nvidia would have had at its disposal a set of technologies on which most electronics manufacturers depend.

For the deal to happen, Nvidia needed the support of the antitrust agencies of the United States, the United Kingdom, and China. It, of course, did not occur because of the before-mentioned reason.

Why is the breakup of the agreement a positive for everyone? Despite all the benefits that Nvidia would get, it is still a big question whether NVDA would then be able to recoup the $80 billion that it intended to spend to acquire Arm. This amount should be spent on strengthening positions in industries where the company feels confident: video cards, hardware for autonomous driving and AI/ML, etc. After breaking the contract, Arm plans to become a public company and go public by March 2023.

Company outlook

In making the decision, the investor should keep in mind that the company is growing at a significant rate due to the huge demand for video cards and the need for acceleration units for data centers. Thanks to these catalysts, the issuer’s Q3 2021 revenue reached $7.1 billion, up 50% from the same period in 2020. The chipmaker’s adjusted earnings climbed 60% year-over-year to $1.17 per share.

The issuer is projected to generate revenue of $74 billion in Q4, a 48% increase over 2020. Gaming and data centers should remain the main catalysts for this growth and account for approximately 90% of the chipmaker’s total revenue.

Nvidia should retain its leading position in major markets. So, its share in the market of discrete graphics processors should reach $54 billion of income by 2025. In 2020, the chipmaker’s share here was $23.6 billion. That is, over five years, the growth should be 83%.

The data center GPU market is projected to reach $20 billion by 2027, with an annual growth rate of 42%.

Note that NVDA is exploring new territories, such as the metaverse and unmanned cars. According to Wells Fargo, participation in the metaworld will give the company a revenue of $10 billion in the next five years. Nvidia’s involvement in the development of unmanned vehicles should bring it $8 billion over the next five years.

Buy Nvidia during the drawdown

The fundamental positions of the issuer are stronger than ever, and the current recession, in our opinion, will not greatly shake the position of the chipmaker. The increased demand for Nvidia solutions will help the company quickly recover and return to growth. The shares are worth buying, even despite their high price.

Previous quarterly reports

AbbVie

In early February, AbbVie reported all of 2021 and Q4 2021. The issuer’s total revenue was $14.89 billion, falling short of its forecast of $14.97 billion. The pharmaceutical company’s net income rose to $4.04 billion. AbbVie earned $3.31 per share.

Adjusted earnings for the new fiscal year should be in the range of $14.00 to $14.20 per share. Analysts expect earnings of around $13.99 per share.

The strong report pushed the stock up as we expected. It broke through the $140 level and moved up to $142. Our forecast remains unchanged; we expect the market to move towards $165.

Ford Motor Company

Ford Motor Company’s financial report disappointed investors. The weak numbers in the report were the result of a global shortage of microchips.

The earnings per share of the issuer came out at the level of $0.26 against the expected $0.45, i.e., almost twice less. However, sales almost matched the forecast. They amounted to $35.3 billion, falling short of the forecast by only $0.2 billion.

Although the automaker managed to turn a 2020 loss into a net profit of $12.3 billion in the last quarter of 2021, the issuer failed to meet its production plan.

Management estimates the company is set to earn between $11.5 billion and $12.5 billion in adjusted earnings in the new fiscal year, an increase of 20 percent to 25 percent over 2021. Ford Motor Company should generate a free cash flow of $5.5 billion to $6.5 billion.

Before the report, the market picture was positive, which prompted us to make a buy forecast. The weak results of the report brought the sellers back to the market, which sent the stock to $18. We see potential in the company, but we do not recommend buying the shares until they consolidate above $22.

Pfizer

Pfizer reported for Q4 2021. Despite the strong numbers in the report, the stock went down as the issuer failed to beat its revenue forecast. Adjusted earnings per share for the earnings period came out at $1.08, whereas experts expected $0.87. The issuer’s unadjusted profit reached $3.39 billion, showing a fourfold growth.

Pfizer’s revenue was $23.84 billion, compared to an estimate of $24.12 billion. The company’s revenue for the year was up 95% to $81.2 billion, compared to $41.6 billion in Q4 2020. Annual adjusted earnings per share were $4.42.

Pfizer also made a good forecast for 2022, which, however, did not meet analysts’ expectations. Moreover, it increased fears that the approaching end of the pandemic will worsen Pfizer’s prospects, even though in 2022, the sales of drugs that are not associated with COVID-19 will be at least $46 billion.

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Arseny Kudrin

Publicist, trader

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