Uber Technologies Inc. (UBER) has announced that it is launching its grocery delivery service in several regions starting with Latin America and Canada with an additional rollout to the United States later this month.
The ride-hailing company will be working with Cornershop, a Chilean online grocery provider as part of a broader push into food delivery after having purchased a majority stake in the business last October. Uber stated that it will begin in the Canadian cities of Montreal and Canada, eleven cities in Brazil that include Sao Paulo and Rio de Janeiro and four Chilean cities.
“We launched Cornershop almost exactly five years ago today, and it’s hard to imagine a better way to celebrate our anniversary than joining forces with the best on-demand platform around,” said Oskar Hjertonsson, founder and CEO of Cornershop. He added, “Uber is the perfect partner to bring on-demand groceries from incredible merchant partners at the touch of a button across the Americas.”
The announcement follows Uber’s recent $2.65 billion acquisition of the food delivery service, Postmates. The deal highlights the company’s push to expand beyond its ride-hailing business which experienced an 80% downturn in April in light of the pandemic.
Uber plans to integrate grocery delivery into its main app while still servicing its customers with the Uber Eats app. The company states that it has partnered with “9,500 merchants to deliver groceries across 35 countries on Uber Eats.”
According to its May report, Uber Eats food deliveries saw an increase of more than 54% year over with grocery-convenience orders increasing by more than 176%. Additionally, meal delivery since mid-March has increased 89% with year-over-year growth in gross bookings in April.
Needham analyst Brad Erikson noted that Uber “provides an incremental (and most importantly, differentiated) way to keep ride-hailing drivers engaged and operating through the obviously more protracted downturn of Uber’s core business.” He assigned a Buy rating on the stock and set a price target of $42 suggesting an upside potential of 26%.
Also optimistic, KeyBanc analyst Edward Yruma stated that for restaurants, Uber will be able to cost-effectively connect with a larger customer base by offering more tools and technology. He reiterated a Buy rating on the stock and $40 price target (20% upside potential).
Overall, UBER is up 11% year-to-date with a Strong Buy analyst consensus that breaks down into 27 Buy ratings versus 3 Hold ratings and no Sell ratings. The $41.77 average price target implies 25% upside potential for the shares in the coming 12 months. (See Uber’s stock analysis on TipRanks).
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