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- Buying Postmates will make Uber a stronger competitor to DoorDash, Wedbush Securities said in a note to clients on Monday.
- Uber’s food-delivery market share could increase to about 33%, pushing it closer to DoorDash’s 44% share, Wedbush said.
- Deliveries have been a bright spot for Uber this year as the coronavirus has reduced the demand for its ride-hailing business.
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“We see the Postmates deal as the ‘right acquisition at the right time,'” the firm said.
After Uber’s acquisition talks with Grubhub, which was bought by Just Eat Takeaway in June, failed to produce a deal, Uber was left “with its back against the wall” in a delivery industry moving toward consolidation, Wedbush said.
With its purchase of Postmates — which ranks fourth in market share behind DoorDash, Uber Eats, and Grubhub — Uber will increase its market share in the food-delivery industry from an estimated 24% in the first quarter of this year to about 33%, according to Wedbush. DoorDash, the industry leader, accounts for about 44% of the delivery market, Wedbush estimated.
“This is an aggressive move by Uber to take out a competitor on the Uber Eats front and further consolidate its market position,” the firm said.
Wedbush added that the Uber-Postmates deal was not likely to attract the scrutiny of antitrust regulators in the way the discussions between Uber and Grubhub did.
Uber Eats has been a bright spot for the ride-hailing company this year as its taxi business has been hit by the coronavirus pandemic. During the first quarter, gross bookings for Uber Eats grew 52% from the first quarter of 2019, while gross bookings for ride-hailing grew 7% from the same period before falling as much as 80% in April. (Ride-hailing bookings have increased since April, according to Uber.)
Despite a recent surge in the demand for food deliveries, competition in the industry to attract new customers and increase orders has led companies to boost discounts and reduce fees charged to restaurants, making it harder to for them earn a profit, Wedbush said.
But on Monday, Uber said in a conference call that its food-delivery business was profitable before taking into account interest, taxes, depreciation, and amortization. The Postmates acquisition will allow for substantial cost cutting between the two companies, Uber CEO Dara Khosrowshahi said.
Are you a current or former Uber employee? Do you have an opinion about what it’s like to work there? Contact this reporter at email@example.com, on Signal at 646-768-4712, or via his encrypted email address firstname.lastname@example.org.
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Axel Springer, Insider Inc.’s parent company, is an investor in Uber.