Uber Eats and other large firms in the rapidly-growing food delivery industry are looking to exit the era of price wars and relentless promotions by buying out the competition. The company’s acquisition of Postmates made headlines this week, following Just Eat Takeaway.com’s recent announcement of a merger with Grubhub. Not only will M&A activity boost the pricing power of these courier platforms, it can also provide a foothold in densely-packed urban markets where some firms remain underrepresented. Though the road to positive cash flow remains rocky, COVID-19 has lit a fire under stocks in the sector and re-ignited investor interest.
Related Stocks: Uber Technologies, Inc. (UBER), Grubhub Inc. (GRUB),
Waitr Holdings Inc. (WTRH), Just Eat Takeaway.com N.V. (TKAYF)
Amid a surge driven by nationwide lockdowns and restaurant closures, the global online food industry is now worth $111.32 billion, according to a report by Business Wire. Looking forward, the market is predicted to grow and reach $154.34 billion in 2023 (a CAGR of 11.51%).
While pulling in huge streams of revenue remains no issue, profitability does remain a major concern for the budding food delivery space.
Last November, MRP noted that Uber’s food-delivery arm known as Uber Eats lost about $1.2 billion in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the trailing 12-month period ended Sept. 30. Gross bookings revenue, and EBITDA “came in shy of our initial expectations, raising questions around the longer-term path to Eats profitability at this point,” wrote Evercore ISI analyst Benjamin Black, cited by MarketWatch. He conceded that there’s “limited visibility into when trends should inflect positively” for Eats.
By contrast, food delivery has been one of the bright spots for Uber over the last few months — whose ride hailing business has plummeted in the wake of COVID-19. Though the pandemic-induced increase in demand helped Uber Eats bookings more than double…