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Will a Grubhub-Uber Alliance Succeed?

By Rhian Hunt – May 13, 2020 at 2:04PM

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Analysts provide conflicting takes.

Analysts appear divided over the future possibilities offered by a potential purchase of Grubhub (GRUB) by Uber Technologies (UBER -0.03%), with some forecasting a strong boost to both companies' share values and others believing the buyout is either unwise or impossible. Grubhub's stock price witnessed a huge jump yesterday, posting close to 30% same-day gains. 

Barclays analysts are making bullish predictions about the possible merger. They predict that the purchase by Uber could cause Grubhub shares to skyrocket as high as $75. The firm boosted its Grubhub 12-month price target from $55 to $79, while forecasting that the purchase, once completed, could nudge Uber's stock value up to the vicinity of $43.

A silhouette of two businessmen shaking hands.

Image source: Getty Images.

Other analysts take an opposite tack. Peter Saleh of BTIG maintained a neutral rating on Grubhub after remarking the government might balk at the deal. He stated that in light of "the significant market share a combined company would enjoy in the food delivery sector, we believe regulators would think twice," and suggested a merger with Yum! Brands (YUM 0.83%) might offer better chances of success.

Lending possible weight to Saleh's doubts, the hypothetical deal is already drawing criticism. Congressman David Cicilline (D-RI) blasted the Grubhub-Uber alliance as "a new low in pandemic profiteering," before going on to describe Uber as "a notoriously predatory company that has long denied its drivers a living wage."

Gig economy staffing platform ShiftPixy CEO Scott Absher provided a different perspective from the analysts, describing the possible $6.9 billion acquisition as a "survival play" for Grubhub and Uber. He added that the buyout could help both handle "the storm that's coming." "The pushback on commissions is strong and it is not stopping," he said.

Rhian Hunt has no position in any of the stocks mentioned. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Grubhub Stock Quote
Grubhub
GRUB
Yum! Brands Stock Quote
Yum! Brands
YUM
$112.33 (0.83%) $0.92
Uber Technologies Stock Quote
Uber Technologies
UBER
$29.18 (-0.03%) $0.01

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