The Uber IPO

Uber to Acquire Food Delivery App Postmates; Analysts Optimistic on Outlook

Uber Technologies Inc, an American multinational ride-hailing company, has announced that it will buy a food delivery company Postmates Inc in a $2.65 billion all-stock takeover, Bloomberg reported, citing people familiar with the matter.

The deal has been agreed by Uber’s board of directors and it could officially be declared by end of business today. However, Uber Eats head Pierre-Dimitri Gore-Coty will continue to run Uber’s combined delivery business, Bloomberg reported, citing an anonymous source.

The news comes after Uber failed to buy a food delivery app Grubhub in June, which was scooped up by Europe’s largest online food ordering service Just Eat NV for $7.3 billion.

On Friday, Uber closed 0.82% higher at 30.68 after rising over 4% on initial reports of its bid for Postmates.

Uber Technologies outlook and price target

Thirty analysts forecast the average price in 12 months at $40.97 with a high of $52.00 and a low of $15.00. The average price target represents a 33.54% increase from the last price of $30.68, according to Tipranks. From those 30, 26 analysts rated ‘Buy’, three analysts rated ‘Hold’ and one rated ‘Sell’.

Last month, BTIG rated ‘Buy’ with a target price of $47 and Wedbush raised the target price to $47 from $38. In May, Citigroup raised price target to $41 from $34, BofA global research raised price objective to $42 from $40 and SunTrust Robinson raised target price to $50 from $42.

Also, RBC raised target price to $52 from $44 and D.A. Davidson updated to buy from neutral; raised target price to $39 from $23.50. Morgan Stanley target price is $47 with a high of $54 under a bull scenario and $19 under the worst-case scenario.

Analyst comment

“Uber is a truly global platform with multiple large addressable markets. We see a path forward for both ridesharing and Eats bookings growth, primarily driven by MAPC and frequency growth. We forecast fairly flat ridesharing ANR take rates (albeit on a growing gross bookings base) and significant growth in Eats ANR take rate, driven principally by order velocity and positive restaurant mix,” Brian Nowak, equity analyst at Morgan Stanley noted in May.

“Uber’s scale and liquidity give drivers higher earnings power and riders lower wait times. Uber’s platform approach allows it to rapidly expand into new business lines (Eats, Freight) and leverage shared expenses,” the analyst added.