GrubHub (GRUB – Free Stock Report) has emerged as one of the more valuable companies in the food delivery space over the past few years. Grub Hub stock price rose by 7% yesterday after news broke about a significant merger in the food delivery industry. Food delivery companies, Takeaway.com and Just Eats, which operate in Europe, announced yesterday that they are now in advanced stages of completing a mega merger.
The valuation of the merged entity is going to be around $10 billion. It will compete with Deliveroo and UberEats (UBER – Free Stock Report) in Europe. However, it seems to have created a knock on effect and investors seem to feel that GrubHub could also be approached for a merger. Does this mean it’s time to start eyeing delivery stocks again?
Special Delivery! On-Demand Tech Companies Hit Billion-Dollar Valuations; Here’s How Investors Can Capitalize In The Market
Chinese investor and WeChat owner Tencent has joined a global lineup of investors seeking to write the biggest check in India’s food-technology sector for Swiggy. The online food-delivery platform has held discussions with a host of investors to raise $500-700 million, a significant portion of which Tencent wants to contribute, according to people familiar with the talks.
Another app called Rappi is a Colombian on-demand delivery startup that has brought in a new round of funding at a valuation north of $1 billion, as first reported by Axios and confirmed to TechCrunch by a source close to the company. DST Global led the more than $200 million in financing with participation from Andreessen Horowitz and Sequoia, all of which were existing investors in the company.
Private companies are mostly driving these billions and trillions of dollars that are being poured into this new On-Demand Economy. The average retail investor has little opportunity to take advantage of it, especially considering this idea of global expansion that could turbo-charge industry growth.
Mega Merger Deals Signal Opportunity For Smaller Companies?
Obviously whenever there are industry-wide roll-ups going on, investors will look to smaller companies with viable business models. GrubHub may be on the list but at its current valuation, it may be a bit higher compared to others like Canada’s ParcelPal Technology (PKG) (PTNYF) for instance.
It’s true that new markets are difficult to enter, especially if it is a brand new way of doing business, such as the on-demand economy. But unlike the Ubers and Postmates in their early years, ParcelPal (PTNYF) (PKG) has already aligned with one of the largest online juggernauts in the history of the modern world.
ParcelPal (PTNYF) (PKG) has engaged in a work order contract with Amazon.com Inc. to fulfill package delivery on behalf of Amazon to residents in Metro Vancouver, British Columbia, Canada. And that’s just for starters. ParcelPal has also begun cornering a “smoking hot” market in North America outside of “only food delivery.”
Something that is beginning to set ParcelPal (PTNYF) (PKG) apart from its immediate competition is its diversification strategy. The company works with the likes of Amazon and that’s just a start. It is also entering into key verticals that are seeing an increase in rapid demand. Right now, ParcelPal has built relationships with businesses in both alcohol and cannabis.
What About GrubHub Stock Price?
GrubHub was one of the earliest food delivery companies to go public. But over the course of the past 12 months, the stock has underperformed. In September 2018, the stock had reached a historic high. Unfortunately the rise in sector competition has seen GRUB stock price plummet by as much as 50%. The company is now facing intense competition from UberEats, while PostMates is gearing up for an IPO. DoorDash is going to remain a tough competitor having raised $1 billion in 2019. In other words, GrubHub has been in a bit of a limbo over the course of 2019.
But that doesn’t mean GrubHub is off the table. Nor does it mean that other companies aren’t gearing up for a hot M&A climate either. When you talk about billion dollar buyouts, you can’t help but wonder which small companies will be gobbled up next. This is especially considering the fact that market leaders like Deliveroo target expansion of a global footprint.