Uber is going to eat Grubhub’s lunch.
At least that’s what investors seem to think in the wake of the company announcing its standalone food delivery service.
Grubhub dropped as much as 8.6% this morning on news that Uber is launching its own standalone competitor to Seamless and Grubhub, the food-delivery services belonging to parent company Grubhub. It’s now recovered a bit and is down only about 2%, as the broader tech market has rallied.
Uber is preparing to launch UberEats, its standalone food delivery app, in 10 US cities, including New York, Los Angeles, Chicago, and Austin, the Wall Street Journal confirmed with the company.
UberEats will be the first standalone app from the company since the launch of the main Uber ride-hailing app, and will be live in the Apple App Store and the Google Play store by the end of March.
In a note Wednesday, analysts at Cowen & Co. said they were lowering their price target for Grubhub from $22 to $2o for a couple big reasons.
- Uber has a leg up on Grubhub in terms of cost and speed because they already have 16 million US users and 400,000 drivers.
- The UberEats launch “includes 5 of 7 top markets making up >90% of GrubHub sales.”
- UberEats seems to be a “strategically important” service for highly valuable Uber.
Uber has been testing the food-delivery service inside of its main app for the better part of the past 18 months, but it then launched as a standalone app available in Toronto, Wired reported last month.
In each of its participating cities, Uber partners with a couple restaurants each day to offer meals to its customers, which the company delivers via courier within just a few minutes. Just like when you’re waiting for your Uber to roll up, you can track your food’s progress on your smartphone as it travels to you. Drivers can choose whether they want to be an UberEats driver, and they receive the ~$5 delivery fee from each UberEats order they deliver.
Benchmark’s Bill Gurley, who invested in GrubHub back in 2011, resigned from Grubhub’s board, GrubHub said in a December 24 filing. Gurley is also an Uber investor, and sits on Uber’s board.
“We view [Mr.] Gurley’s resignation as a loss to GrubHub, but not surprising given his board seat at Uber, which is increasingly competitive with GrubHub,” Cowen & Co. analysts said in a note.
For his part, Gurley denies he stepped down because of a conflict of interest.
“This is what I would call normal VC life cycle,” Gurley told the Wall Street Journal. “It’s important for me to do new investments.”
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