MORGAN STANLEY: GrubHub could get 'Amazoned'

A week after Amazon announced its deal to buy Whole Foods, analysts are beginning to brainstorm about how the “Amazon Effect” will disrupt other parts of the food industry, especially delivery.

In a report published Sunday night, Morgan Stanley downgraded GrubHub‘s stock from overweight to equal weight, slashing the price target from $US47 to $US43.

“GRUB competition is starting to bud,” write analysts at the bank. “Particularly Amazon, with 26% of Amazon Prime members reported having tried Amazon Restaurants in the past six months.”

Chicago-based GrubHub is by far the market leader for food delivery. But, as Morgan Stanley notes, Uber Eats and Amazon are ready to begin their siege on GrubHub’s customer base.

“To be clear, we are not saying that Amazon’s restaurant business is as large as GRUB’s yet (as this does not capture order frequency or average check),” Morgan Stanley said in a note. “But rather that Amazon has shown an ability to grow quickly in this industry.”

Last week, Wedbush senior tech analyst Aaron Turner made the case
for an Amazon buyout of GrubHub. With a similar geographic layout and customer demographics, GrubHub’s roughly $US4 billion market value as of Monday would be small change for Amazon, which closed Monday with a market cap of close to $US480 billion.
“Grubhub is well-positioned for sustained growth in the coming years,” a GrubHub spokesperson told Business Insider. “We turned in our best company results in the first quarter of 2017 and haven’t seen competition hurt our ability to grow.”

GrubHub stock closed down 6.42% on Monday, at $US44.64, and is up 55% over the last 12 months.

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