GrubHub GRUB recently announced the acquisition of Tapingo - a leading mobile-app for campus food delivery services. Valued at $150 million, this transaction is in line with the company's strategy to expand its market offering and customer base.
Tapingo, San Francisco and Israel-based company, already has partnerships with over 150 universities, colleges and professional campuses across the United States and Israel. Some of the major partners include New York University (NYU), University of Oklahoma and University of Southern California (USC) among others.
GrubHub expects to close the latest acquisition by fourth-quarter 2018, the financial impact of which will be disclosed on third-quarter 2018 earnings call. About the Deal
Tapingo makes food ordering very convenient and therefore it is quite popular among college students. Campus students can easily order food from Tapingo using college meal plans options and point of sale (POS) platforms.
Earlier, Tapingo has partnered with many merchants with a close proximity to the colleges and universities. Some of them include "Yum Brands' Taco Bell, Chipotle, Panda Express, Jamba Juice, and Chick-fil-A."
This apart, Tapingo with the help of Amazon's AMZN
Amazon Web Services (AWS) is able to provide real-time service to its customers. For instance, merchants can queue orders based on their order taking capability via Amazon Simple Queue Service (SQS). This, in turn, will help Tapingo communicate clear wait time to its users.
Moreover, GrubHub noted that customers use Tapingo to execute "tens of thousands of order-ahead transactions per day". With order-ahead transactions signifying the new revenue source, GrubHub is expected to monetize on such transactions.
The order-ahead transactions business is set to grow to $38 billion in 2020, per Business Insider
, which is a significant growth prospect for GrubHub.
GrubHub with its efficient delivery network coupled with 85,000 restaurant partners can provide dedicated services to Tapingo's "college campus partners." GrubHub Inc. Revenue (TTM)
GrubHub Inc. Revenue (TTM) | GrubHub Inc. Quote
Partnerships and Acquisitions: A Tailwind
GrubHub has been supplementing organizational growth with strategic acquisitions. Recently, the company completed the LevelUp buyout, which manages digital ordering and payment solutions for national and regional restaurants, for $390 million in cash.
Additionally, acquisitions such as Yelp's YELP Eat24, certain assets of OrderUp markets and Boston-based Foodler have broadened GrubHub's portfolio of restaurants and customer base.
GrubHub is benefiting from partnerships with the likes of Yelp and Groupon GRPN as well. Notably, these partnerships have made Grubhub the preferred partner for online ordering on these platforms.
Competition: A Headwind
The fast growing food delivery market is also attracting other players in the field. Currently, big names like Amazon and Facebook are trying to get into the market. Given the huge resources these companies have, it will not be difficult for them to expand rapidly and cut down on prices.
Moreover, Amazon's restaurant delivery service, which is free for its 101 million Prime members, is a major threat.
GrubHub is also facing significant competition from Uber Eats, which per Second Measure is the fastest-growing meal delivery service in the United States. Additionally, Postmates and DoorDash are considering joining forces to combat GrubHub's dominance in the market.
GrubHub currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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