Investors may want to keep an eye on food delivery stocks.
All after Amazon.com teamed up with Just Eat Takeaway (JTKWY) in a deal that will give U.S. Prime users a one-year membership to Grubhub.
In fact, according to Just Eat Takeaway:
“Starting today, Amazon Prime members in the United States can sign up for a free, one-year Grubhub+ membership and access unlimited $0 delivery fees from hundreds of thousands of restaurants on Grubhub throughout the year. In addition to $0 delivery on eligible orders, Grubhub+ members get access to member-only perks and rewards. The agreement is expected to expand membership to Grubhub+, while having a neutral impact on Grubhub’s 2022 earnings and cash flow, and be earnings and cash flow accretive for Grubhub from 2023 onwards.”
Initially, this isn’t great news for other delivery stocks, like DoorDash (DASH) and Uber (UBER).
That’s because “The bear case for the two incumbent leaders is if this is the first step in Amazon entering the restaurant delivery marketplace, which would represent incremental competition relative to the status quo,” says Needham analyst Bernie McTiernan, as quoted by Barron’s. “For DoorDash in particular, which has benefited from strong share in the suburbs, this partnership could be introducing a stronger competitor.”
Don’t be quick to write off DASH and UBER, though.
As noted by Barron’s: “No matter if consumers are working from home, [Raymond James analyst Aaron] Kessler wrote that U.S. consumers spent $1.65 trillion on food and beverages in 2021, including $911 billion for food and beverage from stores, and $746 billion for restaurants and other eating places.:”
“It’s likely that number will be even higher this year and DoorDash stock stands to gain. In a recently updated online survey conducted by Raymond James, there is continued increases in food-delivery usage, with about 37% of respondents using a third-party delivery app, according to the survey. That’s compared to about 33% 2020 and 29% in 2019,” they added.