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Uber (UBER) is Reportedly Looking to Purchase Postmates

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Uber Technologies, Inc. (UBER - Free Report) is in talks to purchase Postmates, its rival in the food-delivery space, according to The New York Times.

A potential deal between the two companies could be valued at $2.6 billion. Postmates has the fourth-largest market share in the U.S. food delivery space, behind Uber’s food delivery division Uber Eats, which is third. Last year, Postmates had confidentially filed for an initial public offering, but hasn’t gone public yet.

Given the intense competition in the food delivery market, Uber has been looking for a consolidation. To this end, last month the company attempted to acquire Grubhub (GRUB - Free Report) . However, talks fell apart between the two parties in June reportedly due to antitrust concerns. Grubhub is now set to be acquired by Just Eat Takeaway.com, a European food-delivery company.

Uber’s focus on strengthening its foothold in the food delivery market is prudent given the downturn in its core ride-hailing business, thanks to people mostly confining themselves to their homes due to coronavirus. While the pandemic has suppressed the company’s rides business, the same has boosted its Eats business. With people staying indoors amid coronavirus concerns, there has been a surge in online food delivery orders. Evidently, Uber Eats’ revenues jumped 53% year over year in the first quarter, leading to a 14.3% rise in total revenues. Moreover, gross bookings from Eats augmented 52% to $4.68 billion in the quarter.

Zacks Rank & Key Picks

Uber carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Internet - Services industry are CooTek Cayman Inc. (CTK - Free Report) and Dropbox, Inc. (DBX - Free Report) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

While Dropbox surpassed the Zacks Consensus Estimate for earnings in each of the preceding four quarters, CooTek Cayman beat earnings estimates in three of the past four quarters.

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