Top Food Delivery Stocks to Watch in Q4 2020
Food delivery stocks have been one of the biggest beneficiaries of the coronavirus pandemic. Initially, most people resorted to cooking at home when the COVID-19 pandemic hit. However, this was just a hyped trend as cooking meals every day is not a viable choice for most people. Prepping and cleaning after your meals on top of the cooking can be rather exhausting after all. This is where online food delivery companies stepped in. Food delivery services provide a quick and easy means of obtaining food. Any consumer with a smartphone and a credit card can sign up for one of the numerous food delivery services available today. These services range from independent companies that deliver food from restaurants for a small fee to large fast-food chains.
In the last few months, food delivery stocks have been thriving in the stock market. For example, Papa John’s International (PZZA Stock Report) recovered tremendously after the stock market crash in March. As of yesterday’s closing, the stock price had risen by 22% year-to-date. Other similar companies who offer food delivery services like Yum! Brands Inc (YUM Stock Report) and McDonald’s (MCD Stock Report) have also seen admirable growth in the last 6 months. With YUM operating the likes of KFC, Pizza Hut, and Taco Bell, you can see a wide range of food delivery options to choose from. The food delivery industry is estimated to be worth $20 billion in the U.S. alone.
By providing convenience during the pandemic, these companies have not only grown in terms of sales but have also gained a large consumer base. In short, food delivery services have become an essential service that many people now depend on. With this in mind, let us take a look at these food delivery stocks that could present an interesting opportunity for investors.
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Top Food Delivery Stocks to Watch in Q4 2020: Domino’s Pizza Inc.
First on this list is Domino’s Pizza Inc. (DPZ Stock Report). The American multinational pizza restaurant chain is based in Michigan and was founded in 1961. In 2010, former CEO Patrick Doyle came on board to save the then-struggling Domino’s. He did so by instituting changes in core ingredients and expanding delivery services. Since then, the price of DPZ stocks had increased by a whopping 2400%, putting even the biggest tech stocks to shame.
In fiscal 2019, DPZ showed signs of the company losing momentum from its sales growth in the last few years. However, at the start of the pandemic, customers began to depend on Domino’s delivery services much more. This played out to the company’s benefit. Comparable sales in the U.S. increased by 16.1% in Q2 2020 from a year ago. The momentum continued in Q3 where comparable sales growth was 17.5%. This growth is supported by the expansion of the company’s mobile delivery services in recent years. The efficiency of Domino’s delivery services is shown in the company’s results whereby digital orders represented more than half of revenue.
Even before the pandemic, Domino’s solid network of delivery service innovations distinguished them from the rest of the competition. These innovations range from car-side pickup to smart speaker skills, smartwatch apps, and autonomous delivery robots. The company’s investment in this aspect of services has undeniably paid off as it saw double-digit increases in comps sales for Q2 and Q3 2020. In a nutshell, DPZ will likely continue to see growth throughout the pandemic and beyond.
Top Food Delivery Stocks to Watch in Q4 2020: GrubHub Inc.
Next on the list is Grubhub Inc. (GRUB Stock Report). Grubhub is an industry-leading mobile food-ordering and delivery marketplace in the U.S. The company was founded in 2004 and is based in Chicago. GrubHub’s portfolio of brands includes Seamless, AllMenus, MenuPages, LevelUp, and Tapingo. Seamless is an online and mobile food ordering platform for regional restaurants active in the U.S. and London. Grubhub has been offering delivery for restaurants without delivery services since June 2014. Currently, it delivers in more than 50 markets across the U.S. Evidently, GrubHub is no doubt a seasoned veteran in the business of food delivery.
In February 2020, the company launched a new monthly subscription program in the form of GrubHub+. This program offers free, unlimited food delivery from partner restaurants for a monthly fee of $9.99. With people ordering food via the app more often, this would likely incentivize loyal GrubHub customers to subscribe to GrubHub+. GrubHub recently released its Q3 financial report along with a letter to its shareholders. In it, the company reported a 53% year-over-year increase in revenue and a 68% increase in food sales compared to Q3 2019.
CEO Matt Maloney also said, “Earlier this month (October), the Just Eat Takeaway.com shareholders overwhelmingly voted in favor of the proposed acquisition of Grubhub, which is on track for completion in the first half of 2021.” The $7.3 billion all-stock deal would be the gateway for Grubhub to penetrate further into the U.S market.
As of October 2020, GrubHub has more than 30 million active diners. With all this taken into consideration, it seems that GrubHub has no plans of letting the pandemic slow them down. This is why GrubHub is on this list of top food delivery stocks to watch.
Top Food Delivery Stocks to Watch in Q4 2020: Uber Technologies Inc.
The last spot goes to Uber Technologies Inc. (UBER Stock Report). The ride-sharing company had branched out into several other sectors over the years. The service gaining the limelight lately would be Uber Eats. Uber Eats is essentially the online food ordering and delivering a subsidiary of Uber. When it was launched in 2014, most did not think much of the service because Uber generates most of its revenue from its ride-hailing service. However, investors could find Uber’s current earnings worth looking into in the midst of this pandemic.
The pandemic is undoubtedly changing how Uber operates. This is extremely clear in its Q2 financials given how Uber Eats was reportedly earning more than Uber’s ride-hailing services. Elaborating on that, UberEats generated a revenue of $1.21 billion for the company. This is massive compared to the $790 million brought in by ride-hailing in the same quarter.
In more recent news, the American Express Company (AXP Stock Report) announced the expansion of its partnership with Uber. This expansion will include “enhanced food-delivery and ride-hailing rewards” for U.S. cardholders of the Platinum, Gold, and Green variety. From October 27 onwards, eligible members will get access to a one year Eats Pass membership. The perks range from free food delivery to dining discounts. Additionally, starting in 2021, Gold cardholders can get up to $120 in annual Uber Cash, which can be used for rides and at select dining locations. This would likely incentivize the estimated 114.4 million Amex cardholders to use Uber’s services more. After considering all this, are UBER stocks worth adding to your portfolio?