In an attempt to give themselves an edge over Lyft, Uber agreed to buy Postmates for $2.65 billion dollars, and today they’re up 4%, but what does this mean for this stock in the long haul?
My overall analysis of the situation is that this is an underwhelming move on Uber’s part.
Does this give UBER and edge over LYFT?
I suppose — as they work on expanding their food delivery market, but I’d argue that LYFT made a smarter move beginning an essential delivery service. Uber Eats is notoriously low margin, and now they’re adding additional fees and charges (COVID delivery fee– I’ve seen it!) not to mention the fact that DoorDash is much more popular (at least in my area) and has more reach. Adding Postmates, which also only accounts for 8% of the market share in this space, isn’t a slam dunk for me.
In fact, if anything for me it’s more obvious that Uber is grasping for straws. Their revenue, which primarily comes from their ride-sharing services, is down 80% due to the pandemic. While UberEats is a growing revenue stream, it’s pretty minuscule overall. Growing the food delivery market makes sense, but the margins are so low that I don’t think it’ll be enough to save them. While Lyft is just starting out as far as delivery is concerned, they’ll surely have a larger margin on their essential deliveries service, and it won’t come with the $2 billion dollar price tag that Postmates did.
Uber is bleeding money, and for those who are investing it in today because of this acquisition, I think they’ll be disappointed. It appears to me they’re grasping for straws as their primary revenue source gets slammed with COVID.
Want more trading education? Follow me here by signing up for my free newsletter, at www.fivestartrader.com, or in my Mastery program which you can find at www.simplertrading.com/profits. You can also follow me on Instagram, Twitter @traderdanielle, or on Facebook.