Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Grubhub and Yelp Both Had a Great August

By Daniel B. Kline - Sep 1, 2017 at 11:41AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The two companies made a deal that benefits both companies.

Sometimes a business transaction works out well for both side of the deal. That's clearly how the market see the recent agreement between Grubhub (GRUB) and Yelp (YELP 18.38%).

What happened?

The two companies had been competing in the food-delivery space. They agreed to stop doing that with Grubhub acquiring Yelp's EAT24 service, while Yelp agreed to integrate online ordering from Grubhub into its platform.

The deal saves Yelp the cost of running Eat24 while bringing it revenue from any orders it generates for Grubhub on its platform. Conversely, Grubhub gets rid of a major competitor while getting access to its user base.

"Adding Eat24's large diner base and thousands of restaurants to our platform will accelerate Grubhub's mission to become the most comprehensive marketplace connecting takeout diners and restaurants," said Grubhub CEO Matt Maloney in a press release.

A person holds up a phone with a button that says "order"

Grubhub will take over Yelp's Eat24 delivery service. Image source: Getty Images.

So what

Investors clearly liked seeing these two companies partner up. After closing July at $46.13, Grubhub shares finished August at $57.09, a nearly 24% gain, according to data provided by S&P Global Market Intelligence. The same source showed that Yelp closed July at $32.53 and finished out August at 42.60, a 31% increase.

Now what

Both companies have one less headache in that they won't be competing with each other. That should make it easier for the two brands to compete with giants including Amazon and Uber, which have designs on the food delivery space. In addition, both companies face competition from a number of individual brands that have committed to delivery -- some using third-party services and others doing it on their own.

This deal lets both companies play to their strengths. Grubhub gets to deliver food, and Yelp can offer that service as part of its review platform. That helps each company conserve capital for the bigger battles both face.

Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends Yelp. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

GrubHub Inc. Stock Quote
GrubHub Inc.
GRUB
Yelp Inc. Stock Quote
Yelp Inc.
YELP
$38.26 (18.38%) $5.94

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.