Uber’s Victory Over Amazon Doesn’t Make Uber Stock a Buy

Uber (NYSE:) victory over e-commerce giant (NASDAQ:) in the restaurant-delivery market doesn’t mean AMZN is on the ropes, nor is it a reason for the owners of Uber stock and GrubHub (NYSE:) stock to rest easy. It is, however, a victory that the owners of Uber stock can cheer and one that should  at least bother the owners of Amazon stock.

Seriously, Uber May Never Actually Turn a Profit

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Amazon is abdicating the U.S. restaurant delivery market just four years after entering it, seemingly unable to stave off smaller but better-established competitors. The news broke on Monday.

There’s a much bigger message that’s underlying the headlines, however. Specifically, the development serves as anecdotal evidence that Amazon may not be able to become all things to all people, if — and that’s a big ‘if’ — Amazon’s would-be competitors are willing to be creative.

Amazon Is Stepping Down

The news surfaced on Monday, though no official press release from AMZN has yet been published. Rather, in a , Amazon simply explained, “As of June 24th, we will discontinue the Amazon Restaurants business in the US.”

That move follows the shuttering of the UK’s Amazon Restaurants business in December of last year, only two years after its launch.

Shares of restaurant delivery rival GrubHub jumped on the news, while  Uber stock fell despite the development. (Uber also operates a food delivery business.) It’s noteworthy, though, that Uber stock soared last week, spurred higher by posted late last month and then swept even higher by the stock market’s rebound effort.

Amazon’s retreat from the restaurant-delivery business may not be a permanent one, however.

“The shuttering of the platform doesn’t necessarily mean that Amazon won’t eventually invest in the space,” , though he goes on to say “but it at least temporarily removes the existential threat of an aggressive organic expansion and, in turn, positions the company as a potential acquirer.”

Scott believes GrubHub is a potential acquisition target that could pull Amazon back into the space.

Cowen and Company analyst Thomas Champion agrees with Scott’s argument, “down the road should they want to take a step into the market.” Given that Uber is first and foremost a de facto taxi service, it’s a much less likely buyout target if Amazon decides to carve out a piece of the food delivery market.Therefore, the owners of Uber stock shouldn’t see the company as a takeover target.

Both Scott and Champion pointed to Amazon’s recent investment in the U.K.’s food-delivery service Deliveroo, as evidence that the e-commerce company is still interested in the space. The key may be a better-established brand name that doesn’t include the word “Amazon.”

Impact on Uber, Uber Stock, Uber News

Amazon’s decision is certainly a victory for Uber, though not a game-changing one. Uber remains primarily a platform for taking people to and from dinner rather than delivering dinner itself, and that’s not apt to change in the foreseeable future.

Last year, Uber Eats , but it only pocketed a small percentage of those sales. As a result, the unit lost money because it costs more to pay its drivers than the company collected from the restaurants. To that end, perhaps it’s just as well that Uber Eats’ revenue fell 10% in 2018.

Nevertheless, the fact that GrubHub and Uber can at least jointly rattle the likes of Amazon is encouraging to organizations that fear the Amazon steamroller so much they’re afraid to even try to compete with it.

The chief feature of Uber’s Amazon-disrupting effort was the use of an existing asset in a way that initially looked and felt awkward. Uber drivers largely believe they are supposed to transport passengers. But time spent not ferrying people or driving empty vehicles can still be used to generate revenue.

That’s not to say Uber Eats as it operates today will ever be profitable. GrubHub is barely profitable, and its entire existence has been dedicated to the business of connecting consumers with restaurants, for a nominal fee.

Still, this sort of outside-the-box thinking will keep Amazon in check. As has been suggested before, the , the easier it becomes for a rival to do the nuanced, detailed things that the increasingly-complex behemoth can’t do.

That’s  still not a reason by itself to buy GrubHub or Uber stock, though.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, , or follow him on Twitter, at @jbrumley.

The post appeared first on InvestorPlace.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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