By Laura Forman

Investors salivated over DoorDash when it came hot out of the kitchen, but turned up their noses as the novelty wore off. They have since moved back in for leftovers. So is the stock appetizing or not?

The meal delivery company could do no wrong during the height of the pandemic, when eaters who didn't want to cook had few choices other than delivery or takeout and many restaurants had to embrace delivery just to stay in business. DoorDash grew its revenue last year by 228% on an annual basis, propelling it to a peak market value of $68.5 billion in February, just two months after its initial public offering.

Heading into last week's first-quarter earnings report, DoorDash's shares had shed more than 46% of their value from that peak. They have rebounded sharply and even rose on Tuesday following the expiration of a lockup period for insiders to sell their shares -- often a weak day for recently listed companies.

Investors must now evaluate how addictive consumers' delivery habits will remain in a more normal world. A recent study found about 70% of last year's growth across the U.S. food delivery industry was purely because of the pandemic, concluding that if dine-in activity returned to pre-pandemic levels, food delivery growth would decline.

DoorDash said its first quarter revenue grew 198% year-over-year -- an improvement over the 172% growth it saw in the first quarter of last year. Still, as of March 31, restaurants were hardly back to business as usual. Data from OpenTable shows seated diners in the first quarter were down on average 45% nationwide compared with 2019 levels, indicating delivery was still a relative necessity for those craving their favorite restaurant meal.

But things have changed. More recent OpenTable data shows seated diners in the U.S. down an average of just 17% as of the week ended May 17. Of the 80% of U.S. restaurants on OpenTable's network accepting reservations again, seated diners at those restaurants are now more than 90% of what they were pre-pandemic, according to OpenTable, which is expecting the recovery to continue now that mask requirements are lifting.

That shift is at least somewhat reflected in DoorDash's guidance. At the midpoint of its outlook, DoorDash is now expecting Marketplace gross order value -- the total value of goods sold through its largest business segment -- to rise 48% this year compared with growth of 207% in 2020.

It is possible that could prove conservative as the company pushes into additional "verticals." The company said last week that it boosted orders from nonrestaurant categories by over 40% sequentially in the first quarter. Non-restaurant orders are now more than 7% of DoorDash's total -- a small but not insignificant percentage that could help to account for customer stickiness.

But how sustainable is that playbook, and DoorDash's still-rich valuation, in a world that already looks very different than it did just a few months ago? While there are accounting differences, DoorDash shares are still trading at twice the multiple of Uber Technologies and more than four times that of Grubhub, Just Eat Takeaway.com and Deliveroo on the basis of price to forward sales.

DoorDash is the U.S. market-share leader in food delivery services, owning 55% of consumer spending in the week of April 26, according to Edison Trends. Its competitors aren't going anywhere, though, and the pandemic is. DoorDash's investors can't afford to have eyes bigger than its eaters can sustainably stomach.

Write to Laura Forman at laura.forman@wsj.com

(END) Dow Jones Newswires

05-19-21 1113ET