Key Takeaways
- DoorDash agreed to buy Instacart for about $17 billion after Instacart’s talks with Uber went inactive, and its stock sits just above its 52-week low.
- Uber’s delivery bookings grew 26% to $27.5 billion last quarter, and delivery segment operating income jumped 38% to $1.06 billion.
- A bigger DoorDash makes U.S. grocery harder to win while Uber funds Delivery Hero, ezCater and autonomous vehicle partnerships at once.
- The company reports third-quarter results on November 4, with adjusted EPS guided to $0.84 to $0.88, below the $0.89 consensus.
U.S. food delivery just lost a contender.
DoorDash (DASH) agreed this week to buy Instacart (CART) for about $17 billion. Uber Technologies (UBER) had held early talks with the grocery app too, but those talks went quiet before DoorDash closed in.
Uber shares finished Thursday at $66, up 0.7% on the day. They are still down 20.7% this year and sit just above their 52-week low of $64.
The timing is awkward. Uber is in the middle of its own $14.8 billion takeover of Delivery Hero (DHER), and the FTC ordered Uber, Walmart (WMT) and others to hand over data on personalized pricing.
DoorDash takes the grocery prize
DoorDash is paying well above the roughly $13 billion Instacart was worth before the talks leaked. Instacart shares jumped about 8% on the first report, while DoorDash fell about 6%.
Here is where things stand:
- DoorDash gets Instacart’s grocery network for about $17 billion.
- Uber’s talks with Instacart are no longer active.
- Uber is already committed to Delivery Hero, plus a $2.3 billion deal for ezCater.
Walking away may be the disciplined call. Nick Smith, co-founder of Manifesto Growth Architects, told Reuters a deal for Uber “only makes sense if it delivers incremental customer value and profitable growth.”
The stock hasn’t given much credit for that restraint, though…
Uber has given back about a fifth of its value this year, and the Instacart news landed just as shares tested their lows.
Delivery is doing the heavy lifting
Uber’s own numbers look nothing like a business in retreat. Delivery gross bookings rose 26% to $27.5 billion in the second quarter, and delivery revenue climbed 28% to $5.2 billion.
Profit is growing faster. Delivery segment operating income jumped 38% to $1.06 billion.
Mobility looks slower on paper because a UK business model change cut reported revenue by $1.1 billion. Bookings in that segment still grew 22%.
So how has the revenue mix shifted over time?
Delivery has narrowed the gap with rides, and that makes grocery share more important each year.
DoorDash grew revenue 36% in its second quarter, so Uber is chasing a rival that is still accelerating. Adding Instacart’s retailer relationships widens DoorDash’s lead in U.S. grocery.
CEO Dara Khosrowshahi sounded confident in August. “Uber’s platform advantage continues to compound,” he said in the second quarter release.
TIKR tracks 50 analysts on Uber. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Uber, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Uber’s Analyst Ratings
Cheap stock, crowded calendar
At $66, Uber trades at 17x forward earnings and 11.1x forward EBITDA. Wall Street’s average price target is $101, about 53% above the current price.
Insiders have shown conviction too. Khosrowshahi bought 141,000 shares at $70.96 in September, about 8% above where the stock trades now.
The near-term guide is softer. Uber expects third-quarter adjusted EPS of $0.84 to $0.88, below the $0.89 consensus, while adjusted EBITDA should reach $2.86 billion to $2.96 billion.
Uber’s earnings multiple has come down hard over the past three years…
The open question is spending. Uber is funding Delivery Hero, ezCater and autonomous vehicle partnerships at once. It is also fighting a New York City law on delivery worker deactivation alongside Amazon and Instacart.
My take: Passing on Instacart looks right to me. Uber already has the faster profit engine, and $17 billion is a steep price for Instacart. Still, a bigger DoorDash makes U.S. grocery harder to win, and the market wants proof that Uber’s own deals will pay off.
The next checkpoint is November 4, when third-quarter results call in. Bookings near the top of the guided 18% to 22% growth range would go a long way, and the Delivery Hero offer period ends a day later.
So what is Uber stock actually worth?
TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR’s valuation model and see what Uber could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It’s free to use.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
