Not content with ride sharing, food, grocery, prescription delivery, and freight services, Uber (UBER) has now added alcohol delivery to its ever-expanding list of in-app services.
On Tuesday, the company announced it is acquiring on-demand alcohol service Drizly. The new purchase will cost $1.1 billion in stock and cash and the transaction is expected to close in 1H21.
Drizly has a foothold in more than 1,400 U.S. cities. While in 2019, online alcohol sales only made up 2% of the total $120 billion market, according to market research firm IWSR, e-commerce alcohol sales increased by more than 80% in 2020.
The latest addition to the Uber roster goes down smoothly, says Deutsche Bank analyst Lloyd Walmsley.
“Alcohol delivery adds another compelling product offering that can drive higher frequency and loyalty across Uber’s family of products,” said the 5-star analyst. “As Uber continues to diversify its consumer ecosystem and strengthen its competitive array, we are increasingly warming up to the long-term thesis of Uber potentially growing into a Western super app.”
Something like WeChat, the Chinese “all-in-one” app, is what Walmsley is getting at. Is such an app feasible in the West?
The U.S. and other Western countries’ consumers are different to their Chinese counterparts. Furthermore, the bigger choice of high-quality apps and more advanced internet economies creates “less raw potential for a WeChat-style super app to take hold.”
On the other hand, says Walmsley, an app offering a wide array of services in one place has potential to “over time grow into a meaningful share of overall consumer wallet spend.”
Throw in subscription programs such as Eats Pass, and there’s the potential to lock in consumers’ “purchase behavior.”
Uber appears to be thinking along these lines. Walmsley says the fact Uber recently made all its products/services available within the main Uber app, underscores the idea that “Uber is slowly evolving into a one-stop-shop.”
So, good for Uber, but what does it all mean for investors? Walmsley reiterated a Buy on the stock whilst sticking to an $80 price target. This figure suggests a 37% upside potential from current levels. (To watch Walmsley’s track record, click here)
Rating wise, most of Walmsley’s colleagues agree. UBER’s Strong Buy consensus rating is based on 23 Buys and 2 Holds. However, going by the $61.13 average price target, the forecast is for a modest 4%. (See Uber stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment