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As the pandemic forced restaurants across the United States to close their dining rooms - food delivery apps saw a massive uptick in orders. And Uber Technologies Inc. (NYSE: UBER) is looking to capitalize on that.
Uber's ride-hailing side of business got hit hard by the pandemic, but its food delivery business, Uber Eats, saw gross sales growth of 54% during its first fiscal quarter. Uber Eats is one of many food delivery apps available on the market - but now, the massive ridesharing company is looking to take out its competition - by acquiring them.
Uber has reportedly agreed to buy Postmates in an all-stock deal, which will cost it $2.65 billion. This isn't the first time Uber has tried to "buy up" the competition either. Uber also offered to buy Grubhub Inc. (NYSE: GRUB) earlier this year, but the deal fell through.
Now, Postmates is a smaller company than Grubhub, but the deal is a win for Uber, no doubt. Of course, the question is how you make money here. I'll show you...
Where's the Money?
This year, after the failed deal with Uber, Grubhub was acquired by Just Eat Takeaway in a deal worth $7.3 billion. And while the Uber and Postmates deal isn't yet "official," I do expect the papers to be signed soon officially.
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Once those papers are signed, the main competitors in the food delivery market would be Uber Eats/Postmates vs. Grubhub/Takeaway vs. DoorDash. And this power struggle could help be the catalyst for the perfect setup to snag some fast cash.
Here's what I'm looking at...
While many might see this new deal as a hotbed for cash, I'm not going to be chasing this latest acquisition. Because when you look closely, you'll see that Uber's numbers aren't that great. After launching its IPO last May, the stock has lost a third of its value. And while many investors remain bullish, currently, I'm just not convinced this is a stock that will work for my portfolio.
But with that said, that doesn't mean I'm not throwing my hat into the "battle of the food delivery apps." In fact, I'm doing the opposite. I'm just going with the company that isn't in the headlines right now: Grubhub Inc. (NYSE: GRUB).
GRUB boasted 180 million orders for 23 million customers last year. Just Eat Takeaway processed 413 million orders for 48 million customers. And as we discussed earlier, orders have seen a massive uptick due to the stay-at-home mandate.
With these kinds of numbers and proof of constant growth, I genuinely believe GRUB could be a great asset to your portfolio. And the best part? While everyone has their eyes on UBER, you can secure GRUB for a fantastic price and watch your money continue to grow.
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About the Author
Andrew Keene is a globally known trader and a renowned expert on all things options.
