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The Grubhub Partnership With Amazon Will Benefit Both Companies

Grubhub parent Just Eat is our top pick in the food delivery segment.

Securities In This Article
Just Eat Takeaway.com NV
(TKWY)

On July 6, Just Eat Takeaway (TKWY) announced a business partnership with Amazon in the United States allowing Amazon Prime members to join up for a free Grubhub Plus subscription for one year (free delivery from selected restaurants plus member-only perks and rewards). The business anticipates the relationship will increase membership in Grubhub Plus while having a neutral impact on Grubhub’s profits and cash flow in fiscal 2022, and a positive impact beginning in fiscal 2023. Amazon will obtain warrants over 2% of Grubhub’s fully diluted common equity and up to an additional 13% of Grubhub’s common equity in conjunction with the commercial agreement. The second tranche of warrant vests largely depend on the number of new customers obtained as a result of this relationship, but the exercise price was not specified in the media announcement (formula-based price). We retain our EUR 126 fair value estimate and narrow moat rating for Just Eat. The share price is in 5-star territory. Just Eat is our top pick in the food delivery segment.

We believe the deal will benefit both firms. Amazon is able to add meal deliveries as an additional perk for Prime members and maintain some upside in the partnership’s performance (through warrants of up to 15% of Grubhub’s equity). In the past, Amazon attempted to enter the meal delivery market, but was generally unsuccessful in the U.S. and U.K. (Amazon Restaurants shut down in 2019). Grubhub has the ability to access a large client base (150 million-160 million Prime members in the U.S.) and work with one of the most well-known worldwide brands/retailers. Amazon has a similar deal with Deliveroo in the U.K., which resulted in Deliveroo doubling its Deliveroo Plus client base (to about 1.5 million in our estimates).

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Ioannis Pontikis, CFA

Director of Equity Research in Europe
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Ioannis Pontikis, CFA, is a Director of Equity Research in Europe for Morningstar, where he covers European grocers and global food and beverage companies like Tesco, Unilever, Nestle, and Danone, and manages a team of eight analysts across the Financials and Consumer sectors. He also leads Morningstar’s Equity Research Valuation Committee, advancing the firm's valuation methodology through significant projects such as developing new methodologies, refining our valuation model, and enhancing the efficacy of our ratings.

Before joining Morningstar in 2017, Pontikis spent six years on the buy-side, co-managing a $100M long/short equity fund and leading teams in applying machine learning to stock and equity factor selection models. He developed the fund's valuation and risk assessment framework, achieving strong risk-adjusted performance. Prior to this, Pontikis worked at Nestle S.A. in Athens, focusing on financial reporting, budgeting, and auditing proposals to improve processes.

Pontikis research has appeared in numerous media outlets including Bloomberg, CNBC, Reuters, Guardian, Frankfurter Allgemeine Zeitung among others.

Pontikis holds a bachelor’s degree in business administration from the University of Piraeus’s and a master’s degree in accounting and finance from the London School of Economics. He also holds the Chartered Financial Analyst® designation and studying towards an advanced post-masters degree in portfolio and risk management.

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