Uber falls into the red as investors assess Amazon's GrubHub delivery deal
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Uber Technologies (NYSE:UBER) shares fell almost 4% Wednesday as Atlantic Equities analyst James Cordwell cut his price target on the stock nearly in half due to near-term delivery business concerns, and reaction to a new tie-up between Amazon (AMZN) and GrubHub.
Cordwell lowered his price target on Uber (UBER) shares to $35 from $60, saying that the ride-sharing leader is facing the potential for "muted" growth in its delivery business. However, Cordwell also noted that the company is likely "on the cusp of significant free cashflow growth" and net profitability as its businesses recover, the economy continues to reopen and it operates more efficiently.
Additionally, even though there are some near-term concerns about Uber's (UBER) delivery business, Cordell expects that in the medium term, the company is likely to have "multiple years of strong double digit growth" and its advertising business should help enable strong profitability.
Cordwell added that Uber's (UBER) mobility business is "well positioned" due to investments in getting more drivers to better serve demand, the competition environment looks "benign" and expectations are modest.
As Uber (UBER) shares retreated, the company's top rival, Lyft (LYFT), also went into the red and dropped by more than 4%.
The food-delivery industry woke up to the news of new activity involving Amazon (AMZN). The e-commerce giant, and owner of Whole Foods, announced a deal to add GrubHub delivery as a perk to Amazon Prime members' subscriptions. Amazon (AMZN) also took out an option to purchase a 2% stake in GrubHub, and could buy up as much as 15% of the company if certain performance metrics are met.