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Demand for Food Delivery Soars Amid Coronavirus Crisis: 5 Gainers

Zacks Equity Research

With lockdowns imposed by governments across major cities worldwide and people maintaining social distancing, getting necessary food and groceries has become a Herculean task. However, in several countries food delivery services are going all out to reach as many homes as possible. 

Thanks to the already strong network due to digital commerce, delivery service providers are trying to implement contactless delivery or using bots to drop essentials at doorsteps. With coronavirus now infecting around 1.5 million people globally, staying indoors seems to be the only way out till a cure or vaccine is found.

As the pandemic may require a few months to clear out totally, food delivery services can be a savior till that time.

Partnerships Boosting the Industry

There are several small and big food delivery service providers across the globe. While some companies like Yum! Brands have their own delivery chains, many restaurants opt for food ordering and delivery platforms like Zomato and Grubhub Inc. GRUB.

Given the rising demand for food delivery services, due to closure of dine-in facility and people locked at home, many delivery companies are offering free delivery to aid restaurants in overcoming losses. Amid this chaos, many food giants are also getting into partnerships with delivery providers to boost their business. For instance, Chipotle Mexican Grill, Inc. CMG announced a partnership with Uber Eats to expand its digital and delivery business. As a result, customers across America will be able to order Chipotle food through the Uber Eats app as well as ubereats.com.

These partnerships are not only helping restaurants survive the coronavirus onslaught but also bringing rapid digitization in American fast-casual restaurant sector. Grubhub added more than 20,000 new restaurants in March, which topped February’s record addition of 5,000. Similarly, in the United Kingdom, Deliveroo added 3,000 new UK restaurants in March.

Additionally, some of these delivery platforms are also widening their portfolio. Uber Eats has broadened its grocery offering after a partnership with supermarkets like Carrefour. Moreover, these platforms are also offering incentives to restaurants like commission cuts, waiver of delivery fees and signing up new members, to help restaurants improve their cash flow and help them through the crisis.

Robots Aid in Contactless Delivery

Another factor that boosts this space is advancement in artificial intelligence (AI) and robotics. Needless to say, that food delivery has its share of risks. There is a chance of human contact as far as deliveries are concerned, which can spread the infection. Robots and drones have an important role to play in this regard. These robots offer contactless delivery and also have low to no fear of infection spread.

Since lockdowns were imposed, Postmates delivery robots have helped in delivering food in Los Angeles. Manna, an Irish drone delivery start-up is ramping up flight testing of its drones, nearing 2,000 test flights per week. The drones can drop deliveries directly into customers’ garden. The company is in talks with regulators to get rapid permission for a wider launch.

Meanwhile, Starship’s autonomous robots are already making restaurant deliveries in Tempe. In Fairfax City, Starship Technologies is developing a pilot program that will allow robots to deliver food from Old Town restaurants to residents who are at-risk due to their age or compromised immune systems. In fact, the robots may be in service from Apr 16 onward.

5 Stocks to Watch

Given the development in the food delivery service industry and fears of further spread of the virus, it is prudent to say that these five stocks are likely to rally in the near future.

Blue Apron Holdings, Inc. APRN operates as a direct-to-consumer platform delivering original recipes, and fresh and seasonal ingredients. The company’s e-commerce market offers a range of cooking tools, utensils, pantry items and other products.

The company’s expected earnings growth rate for the current year is 4.3% against the Zacks Food - Miscellaneous industry’s projected earnings decline of 2.1%. Blue Apron carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Chewy, Inc. CHWY provides pet food, pet products, pet medications, and other pet health products. Even in the coronavirus crisis, pet owners believe dog food, cat food, and cat litter are not discretionary expenses, hence their demand is consistent.

The company’s expected earnings growth rate for the current year is 27.6% compared with the Zacks Consumer Products - Staples industry’s projected earnings growth of 3.4%.  Chewy carries a Zacks Rank #2.

Ride-hailing company Uber Technologies, Inc. UBER may have lost riders owing to lockdowns but Uber Eats is trending higher due to increase in demand for food and grocery delivery. The company is poised to grow from partnerships and brand expansions. Uber carries a Zacks Rank #3 (Hold).

Grubhub provides an online and mobile platform for restaurant pick-up and delivery orders. The company’s expected earnings growth rate for the next year is more than 100% compared with the Zacks Internet - Delivery Services industry’s projected earnings growth of 29.9%. Grubhub carries a Zacks Rank #3.

Lastly we have, pizza delivery company, Domino's Pizza, Inc. DPZ. The pizza maker has joined forces with India-based packaged consumer goods major ITC Foods to launch Domino’s Essentials to help customers order everyday grocery essentials. Earlier, Domino's had launched contactless delivery that helped consumers get food delivered without interacting with the delivery personnel.

The company’s expected earnings growth rate for the current year is 6.2% against the Zacks Retail - Restaurants industry’s projected earnings decline of 21.2%. Domino's Pizza carries a Zacks Rank #3.

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Domino's Pizza Inc (DPZ) : Free Stock Analysis Report
 
Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report
 
Grubhub Inc. (GRUB) : Free Stock Analysis Report
 
Blue Apron Holdings, Inc. (APRN) : Free Stock Analysis Report
 
Uber Technologies, Inc. (UBER) : Free Stock Analysis Report
 
Chewy Inc. (CHWY) : Free Stock Analysis Report
 
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