Is Uber about to eat GrubHub's lunch? Shareholders think so.
The food delivery company's stock tumbled as much as 8.6 percent Thursday on news that Uber Technologies is preparing to go live with a full-scale meal delivery service across 10 U.S. cities, known as UberEATS, after a successful trial in Toronto. Investors had already been fleeing on fears the once fast-growing company's prospects have dimmed.
Are such fears premature? Maybe. Even though Uber could quickly gain share, GrubHub remains the incumbent, at least for now. It has a pool of 6.4 million active diners , half a million which were added in the quarter ended Sept. 30. Perhaps harder to replicate, it has more than 35,000 restaurant partners. And while order frequency has declined overall, the average order value is climbing, albeit marginally. Plus, the company's monthly online visitor base is at least three times higher than its largest competitor, Eat24 (owned by Yelp), and more than all its direct competitors combined, according to comScore data cited by Mizuho analysts.
Still, GrubHub has shed 46 percent in the past 12 months to a level well below its April 2014 initial public offering. It's now trading at a forward price-to-earnings multiple of 26.5, perhaps a more justified figure than the multiple of 67 it commanded just a year ago and a steep discount to other e-commerce players like Yelp (36.9 times). And some even expect the company has further to fall: 28 percent of the GrubHub's shares outstanding are sold short, positions which represent $345 million, according to data compiled by Markit and Bloomberg.
Unless GrubHub teams up with a European rival, UberEATS could be the first player to truly take the food delivery business global: it has signaled that it's Europe-bound with a job posting in Paris. That dragged down the shares of U.K.-based Just Eat on Thursday by 2.3 percent, but the company, unlike GrubHub, is still in the green following its April 2014 IPO (its shares are up 57 percent, giving it a much loftier price-to-earnings multiple of 43.1).
The region's other key player, Germany's Delivery Hero is still private so while its stock wasn't hit Thursday, the company's future IPO valuation may be dented by the impending entry of UberEATS. Its very preparation for a public debut is prudent: increased competition could dampen its pace of growth so the sooner it goes, the better.
GrubHub, Just Eats and Delivery Hero may soon be longing for life pre-Uber. But unlike taxi drivers across the globe, they may be better able to defend their turf.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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