Market News

Amazon Strengthens Food Services with Grubhub Deal

Story Highlights

Amazon has inked a deal with Just Eat Takeaway.com N.V. to add Grubhub offerings to its food-related services on Amazon Prime.  The company is to take a 2% stake in Grubhub, which could increase to 15%.

E-commerce giant Amazon (AMZN) has moved to strengthen its food-related offerings in the Prime membership program and has inked a deal to add Grubhub to its suite of Prime services.

AMZN will acquire a 2% stake in Grubhub, which is owned by Netherlands-based Just Eat Takeaway.com N.V. (GB:JET). The Wall Street Journal reports that Amazon could increase its total stake in Grubhub to 15% based on performance.

Just Eat Takeaway.com will continue exploring a full or partial sale of Grubhub. In April, the Netherlands-based company confirmed it was considering a total sale of Grubhub. It acquired the unit for $7.3 billion. According to Bloomberg, the CEO of Just Eat Takeaway.com, Jitse Groen, is under immense pressure to reignite growth after competitors ate into the company’s market share.

What’s New for Prime Members?

The deal paves the way for Amazon Prime members in the U.S. to have delivery fees waived at select Grubhub restaurants. In addition, Amazon will offer a subscription to Grubhub’s membership program, through which members stand to enjoy other discounts. The deal is expected to be renewed annually, unless Amazon or Just Eat Takeaway.com terminates it. The new agreement should bolster the grocery benefits that the company has offered under the Whole Foods market division.

Grubhub CEO Adam DeWitt expects the deal with Amazon to introduce new customers to the company’s membership programs. It should also lead to more business for restaurants and drivers. Nevertheless, it is expected to have a neutral impact on the division’s earnings this year but add to earnings next year.

Wall Street’s Take on Amazon

The Street is bullish about the stock, with a Strong Buy consensus rating, based on 38 Buys and one Hold. The average Amazon price target of $180.01 implies 58.60% upside potential from current levels.

Bloggers Are Bullish

TipRanks data shows that financial bloggers’ opinions are 88% Bullish on Amazon, compared to a sector average of 66%.

Just Eat Takeaway.com Records Positive Website Traffic

The TipRanks Website Traffic tool offers insight into GB:JET performance. In May, Just Eat Takeaway.com N.V. website traffic recorded a 9% year-over-year increase in monthly visits. Year-to-date, website traffic growth increased by 42% compared to the same period last year.

Key Takeaway for Investors

The addition of Grubhub is expected to make Amazon’s annual subscription program more valuable, allowing the company to attract more subscribers. Consequently, the company stands to generate more revenue from Prime in the long run.

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