Summary
- Grubhub stock will be moving towards $75.15 in H121 (from the current price of $74) as the merger with Justeats gets regulatory approval.
- The foodtech market in general is a “winner takes all market” with companies striving to gain >50% market share.
- Grubhub has been the biggest loser in the food-delivery space as Doordash and Ubereats have raced ahead to secure the top two spots in the foodtech space.
- Since the time of Justeat’s acquisition of Grubhub, Grubhub has lost significant marketshare in USA making it a highly overvalued investment.
Investment Thesis
At the time of writing this article, Grubhub (NYSE:GRUB) trades at the price of ~$74. Given that Justeats Takeaway has already agreed to purchase Grubhub at a price of $75.15, this implies an upside of $1.15 per share. The merger is expected to take place in H121. The only risk in such an M&A deal is the weighing the risk of regulatory disapproval (which is a tiny risk) against the acquisition premium price (i.e. $1.15 per share).
About Foodtech
Globally, the foodtech (online food delivery space) has been one of the more interesting technology solutions in recent history. There are a LOT of companies that have popped up around the globe to compete in the food delivery space. Today, most regions have a mixture of global and local players battling for market share. Some of the examples are here:
North America has Doordash, UberEats, Postmates and Grubhub
China has Ele.me and Meituan
India has Swiggy and Zomato
Europe has Takeaway.com, Deliveryhero, Justeats and Deliveroo
South-east Asia has Grab and Gojek
These are just a handful of companies that operate in the food-delivery space. While the foodtech market was ripe for disruption, the high competition has resulted in poor unit economics through constant promotions. This has resulted in only one company being able to generate positive net income in the food delivery space- Meituan in China. As a result, investors have poured in billions of dollars to keep the other food delivery companies afloat.
The industry is dominated by a "Winner takes all" mentality (i.e.Market share >50%). This has caused a lot of M&A activity in the foodtech space. In this article, we're going to dive deep into the North American food delivery market (focusing on USA) and the investment opportunities arising from it.
