The Street's reaction to Uber Technologies Inc's UBER $2.65-billion acquisition of Postmates is mixed as some analysts are praising the deal while others question the logic.
DA Davidson's White: No Major Change In Food Delivery
The U.S.-based market share Postmates holds in the food delivery space stands at around 8%, so Uber's acquisition isn't going to result in any major shift in the competitive space, D.A. Davidson's Tom White said on CNBC.
But keeping Postmates assets out of the hands of a major Uber competitor is an important strategic move, even though it won't speed up Uber Eat's timeline towards U.S. profitability, the analyst said.
Uber didn't overpay for Postmates, as the deal is valued at around three times this year's revenue, he said.
This is reasonable given the market dynamics, including a surge in demand during the COVID-19 pandemic, White said.
Simpler Trading's Shay: Time To Short Uber
Uber overpaid to acquire Postmates, a rival food delivery platform with an "incredibly small" market share, especially compared to DoorDash, Danielle Shay, Simpler Trading's options director, said on CNBC.
It's unlikely Postmates represents the "straw that gets Uber out of this hole," she said.
Uber's chief rival Lyft Inc LYFT deserves credit for the "much better idea" of a delivery platform for essential goods that come with higher margins, Shay said.
"Uber is a short on this news," she said. "I think you can short it around $35 and if it trades up to $40, I think I would short it there as well."
BofA Sees 3 Key Benefits
Uber's acquisition of Postmates is consistent with its vision for industry consolidation and could also be seen as a defensive move for its Uber Eats unit after rival Just Eat acquired GrubHub, BofA Securities Justin Post said in a note. The analyst named three key benefits from the deal:
- Expectations for $200 million in synergies
- Increased Uber order density in large markets like Los Angeles and Phoenix
- Assistance with Uber's expansion into non-food delivery options and subscription offerings
Uber also noted in an investor presentation that Postmates recorded $643 million in gross bookings in the first quarter that generated $107 million in revenue for the company, he said.
Bookings grew more than 50% quarter-over-quarter in the second quarter, which implies a deal price of around 0.6 times run-rate bookings versus JustEat's acquisition of GrubHub at 1.0 times 2021 bookings, Post said.
BofA maintains a Buy rating on Uber's stock with a $42 price target.
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Photo courtesy of Postmates.
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