DoorDash is taking off while Zoom remains in limbo

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As the old adage goes, what goes up must come down.

The pandemic proved to be a boon for a wide range of companies, from Zoom (ZM) to Peloton (PTON) to DoorDash (DASH). But once the hype faded, some companies translated their burst of popularity to a long-term business, while others are looking like one-hit wonders with dying fads.

The most famous pandemic darling remains Zoom, which vaulted from a moderately successful company to becoming a verb. In October 2020, Zoom’s stock shot to a record $559 a share. Today, its shares are trading at around $72.

The company has been struggling as people return to business as usual with in-person work and socializing, said Dave Mawhinney, executive director at Carnegie Mellon’s Swartz Center for Entrepreneurship.

“Zoom faces intense competition from other video conferencing platforms like Microsoft Teams, Google Meet, Cisco WebEx, and so on,” Mawhinney pointed out. “To remain successful long term, it needs to be ‘compellingly better’ or ‘compellingly cheaper’ than alternatives.”

It’s a test that Zoom has failed, Mawhinney argues, as its products have not been significantly better or cheaper. When the company reported its results for 2020, it boasted a 326% jump in revenue (to $2.65 billion), while its net income rocketed to $671.5 million, from $21.7 million the year prior.

Two years later, Zoom is sporting a revenue of $4.39 billion for 2022, a 7% year-over-year increase, while its net income has dropped to $103.7 million.

Zoom represents a broader problem for pandemic-era successes: securing what it gained during the lockdowns.

“Zoom didn’t invest that much in advertising during the pandemic, perhaps for obvious reasons. But now Zoom is investing a lot in marketing and sales, almost threefold compared to the 2021,” said Pablo Hernandez-Lagos from Yeshiva University’s Sy Syms School of Business.

So far, additional marketing hasn’t stopped the bleed for Zoom. This month, the company was dropped from the Nasdaq 100 in favor of DoorDash, whose stock has shot up 110% this year.

“With demand for delivery broadening beyond restaurants during the pandemic, DoorDash launched convenience (April 2020), DashMarts (August 2020), grocery (August 2020), and alcohol (September 2021) and acquired Wolt (May 2022),” wrote Andrew Boone of Citizens JMP Securities.

“To that end, we believe demand for these newer businesses is scaling, helping to improve unit economics … DoorDash has optimized each of these launches, which supports persistent contribution margins and higher profitability going forward.”

Rival Uber (UBER) is a top pick for JP Morgan, according to a client note by JPMorgan analyst Doug Anmuth. His team projects continuing demand for food delivery in 2024, particularly in newer categories like groceries.

ShiftKey, a startup that focuses on flexible healthcare work, offers insight into what sustainable post-pandemic success can look like. Its platform connects healthcare professionals, like nurses, with open shifts at nearby hospitals.

The company experienced a meteoric rise during the pandemic and has since held on to that boom.

“We started in a position where we were serving a very focused area of the country. We were born and bred in Dallas, Texas,” said ShiftKey CEO Mike Vitek. The company now operates in over 120 markets across the US.

During COVID, ShiftKey’s scheduled hours grew by 20 times, and those scheduled hours are now 24 times of what they were pre-COVID. The company, valued at a reported $2 billion, closed a $300 million funding round last January amid a difficult VC market.

The lesson for public companies is this: If the pandemic changed something permanently, or revealed something essential, you’ll be okay. Otherwise, you’re in limbo. Coming from a place of strength, for example, facilitated a continued upward trajectory, as was the case for Nvidia (NVDA) and Microsoft (MSFT).

“Microsoft … finally acquired Blizzard, and really shored up Teams as an enterprise,” said Carnegie Mellon professor Ari Lightman. “And the pandemic’s when you started to see the setup for the surging of Nvidia — even before the craziness of generative AI, they were pushing some really amazing chipsets that were competing with Intel.”

There are some pandemic losers who may turn into winners, Gene Munster, managing partner at Deepwater Asset Management, told Yahoo Finance. Take real estate tech company Opendoor (OPEN), which buys and sells residential properties online. Its stock catapulted to over $34 per share in 2021. But in 2022, the company was losing more than $1.3 billion and entrenched in an existential cost-cutting push; its shares dropped to as low as $1.02.

“I think Opendoor is going to find a way to be an important part of the homebuying decision now … They’re gonna return to growth next year and likely be profitable at the end of next year and no one’s doing what they are,” Munster said.

Despite the losses, Opendoor nearly doubled its revenue in 2022 to $15.6 billion. Over the last 12 months, its shares are up 222%.

Peloton, on the other hand, is in a tricky spot, said Munster. Its stock is down 24% this year and 96% from its high in December 2020. While demand swelled during the lockdown, permanent changes in people’s exercise habits are tough to come by.

“I don’t think they’re a real long-term growth story … Ultimately I think Apple buys Peloton,” Munster predicted. “It’s just a very hard business to get to grow.”

In the end, as the pandemic retreats, it has revealed who had the most sustainable businesses when the pandemic began.

“Crises are usually seen as, think of a wave that wipes out old sand and leaves the rocks, so it leaves the fundamental needs of our society,” said Hernandez-Lagos.

Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on X, formerly Twitter, at @agarfinks and on LinkedIn.

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