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Shares of Just Eat Takeaway (AS:TKWY) are surging in Europe today after Amazon (NASDAQ:AMZN) acquired a 2% stake in the company’s U.S. food delivery unit Grubhub.
Moreover, Amazon has an option to increase its stake to 13% if certain performance-related obligations are met.
The e-commerce giant can now offer its Prime members access to the free delivery service for a year. In the meantime, Just Eat said it will continue exploring “the partial of full sale of Grubhub.”
BofA analyst Michael McGovern moved quickly to cut the price target on Just Eat’s rival DoorDash (NYSE:DASH) to $85 per share from $90 as Amazon’s involvement will likely bring increased competition for DASH.
“This offer should lead to elevated competition for its DashPass subscription offering, which competes with Grubhub+ and could see headwinds to customer acquisition and retention,” McGovern told clients in a note.
“Although we think Grubhub’s platform lags DoorDash in restaurant selection and logistics capabilities, free user acquisition from a base of 100mn Prime subs will be a competitive advantage. We believe the DashPass offering maintains competitive advantages in restaurant selection, logistics speed, and non-restaurant categories that will continue to generate share gains despite elevated competition for customers,” McGovern added.
The analyst sees “little impact” on DASH’s near-term growth or margins. Still, McGovern forecasts “some overhang for the stock due to the long-term potential for Amazon to re-enter the food delivery industry.”
DASH shares are down 8% in pre-open Wednesday.
