We are currently living in a new era – staying home, avoiding people, and of course, online shopping and delivery. Companies such as GrubHub, Uber Eats, and Postmates have had their services in higher demand than usual. Along with the high demand, certain companies, such as Uber, are looking for their next big step in gaining more market ownership.
(Chart above week of July 13th, 2020)
What To Look For
July 1st, 2020, Uber had made an offer to acquire Postmates- a rival to Uber’s food delivery service, and July 6th, 2020, the agreement was made to buy Postmates for $2.65 billion in stock. According to Liyin Yeo of Second Measure, Uber Eats currently holds the spot as the fourth-largest U.S food delivery service, having it trail DoorDash in market share. However, Uber might be at an advantage- as Postmates also offers grocery delivery from Walmart. Due to the demand for ride-sharing falling due to Covid-19, Uber is now relying on food delivery to help sustain its business. In their first-quarter earnings call, Uber reported gross bookings revenue was down 80% in April from a year earlier, while gross bookings revenue in Uber Eats was up more than 50% during that period.
Conclusion
Postmates has seen success in urban areas such as Miami but overall has struggled to compete against Doordash, GrubHub, and Uber Eats. Initially, Uber may still trail behind in the food delivery market share but may now have an opportunity to obtain more. On May 10, 2019, Uber was labeled as one of the most-watched IPO stocks today. While it may not be a buy right now because of Covid-19, obtaining Postmates might be the push Uber needs to gain more profit.
I made my trades with Uber, because I do agree Postmates will be intricate for their business scalability in other areas of delivery.
Potmates needs to prove profit, otherwise it’ll be a burden and another expense to Uber’s already weakened revenue and stock projections.