Shares of Uber Technologies soared 7% after the ride-hailing company announced the acquisition of alcohol delivery start-up Drizly for $1.1 billion.
Uber (UBER) expects to pay more than 90% of the deal amount with its common stock, with the balance in cash. Following the completion of the transaction, Drizly will operate as a wholly-owned subsidiary of Uber and its marketplace will be integrated with the Uber Eats app. The deal is expected to close within the first half of 2021.
Uber CEO Dara Khosrowshahi said, “we’ve been branching into new categories like groceries, prescriptions and, now, alcohol.” He added, “By bringing Drizly into the Uber family, we can accelerate that trajectory by exposing Drizly to the Uber audience and expanding its geographic presence into our global footprint in the years ahead.” (See Uber stock analysis on TipRanks)
Following the deal announcement, Wedbush analyst Daniel Ives maintained a Buy rating and a price target of $60 (6.3% upside potential) on the stock.
In a note to investors, the analyst said, “the food delivery business around Uber Eats is gaining significant scale and scope both organically, as well as via acquisitions (Postmates, Drizzly, Cornershop) and we believe this segment is now worth in a base case scenario roughly $15 per share to the stock with Drizly deal another smart strategic move that is moving delivery well beyond restaurants only.”
Ives added that “with a vaccine now on the horizon with mass distribution likely by mid-2021, we expect consumer demand for Uber to show a significant snap back during the course of 2021 with the company potentially getting back to pre-COVID ridership by early 2022.”
Like Ives, the rest of the Street has a bullish outlook with a Strong Buy consensus rating based on 22 Buys and 2 Holds. The average analyst price target of $61.39 implies upside potential of about 8.7% to current levels. Shares have gained 55.6% over the past year.
Furthermore, UBER scores a “Perfect 10” from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.