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Take a Bite of Uber-Postmates Deal With These ETFs

Sanghamitra Saha

Mergers and acquisitions in the global food delivery space have been heating up. The consolidation ofUber Technologies Inc UBER and Postmates is a new development in the segment. Uber is buying Postmates for approximately $2.65 billion in an all-stock transaction. This transaction will unite Uber’s global Rides and Eats platform with Postmates’ distinctive delivery business in the United States. The deal will likely be sealed in the first quarter of 2021.

Postmates is the fourth-largest U.S. delivery food service and the second-largest service by market share after DoorDash, according to Second Measure and Edison Trends. At the current level, DoorDash controls about 44% of the U.S. meal delivery market while Uber Eats had about 23% share before the Postmates deal. This explains Uber’s urgent need for the acquisition.

Postmates’ business model complements that of Uber Eats. Uber also indicated that Postmates has been an early pioneer of “delivery-as-a-service,” which matches Uber’s efforts in the delivery of groceries, essentials and other goods. On Jul 7, Uber further expanded delivery offerings, launching an app-based grocery service in several Latin American and Canadian cities, with the United States to join in late July.

Given the intense competition in the food delivery market, Uber, carrying a Zacks Rank #3 (Hold), was looking for a consolidation. Uber had made an attempt to acquire GrubHub last month but the talks did not materialize. GrubHub instead sold to Dutch food delivery service JustEatTakeaway in early June for about $7.3 billion.

Food & Grocery Delivery: A Need of the Hour

Uber says that the Postmates acquisition will help it become profitable by 2021, despite a struggling ride-sharing business amid low demand during the coronavirus pandemic. At the start of the year, Uber said that it expected to score a profit by the fourth quarter of 2020, but withdrew its guidance in May as the ride-sharing business was hurt by the virus pandemic and the resultant stay-at-home mandates.

Now, food delivery business is acting as a Trump card. Coronavirus-led social distancing has boosted the demand for such services greatly in recent months. As more people and more restaurants have signed up for such services, Q2 bookings on Uber Eats are up more than 100% year on year.

In its last quarterly earnings results, the Uber Eats business grew 52% and helped offset a massive decline in ride-hailing revenues.Uber has about 9,500 active merchants, with grocery-convenience orders increasing by more than 176% since February. Uber’s stock has risen about 6.2% since the company announced the deal on Jul 6.

How to Play?

If you want to take a grab of the increasing demand for food and meal delivery services, you can bet on the Uber-Postmates deal. Along with the stock specific option, there are some ETFs that could help you gain the Uber exposure. Below we highlight three ETF options that have considerable exposure to Uber.

Renaissance IPO ETF IPO: Uber – 8.96%

ETFMG Travel Tech ETF AWAY: Uber – 5.66%

First Trust US Equity Opportunities ETF FPX: Uber – 3.70%

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ETFMG Travel Tech ETF (AWAY): ETF Research Reports
 
First Trust US Equity Opportunities ETF (FPX): ETF Research Reports
 
Renaissance IPO ETF (IPO): ETF Research Reports
 
Uber Technologies, Inc. (UBER) : Free Stock Analysis Report
 
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