Analyst: Grubhub Could Be Next On Amazon's Shopping List

(RTTNews) - GrubHub Inc. shares gained around 5 percent on Monday after an analyst suggested that the online and mobile food-ordering service could be the next buyout target of Amazon after its acquisition of Whole Foods Market Inc.

Wedbush Securities' analyst Aaron Turner reportedly said that an Amazon-GrubHub deal would be a "win-win" for both companies.

Based on a similar premium to that applied in the Whole Foods deal, Turner suggested that a price of $55 a share for GrubHub "is well within the realm of possibility." The project price is 21% above current prices and 17% above the April 27, 2015, record close of $47.18. That would result in a market capitalization of $4.74 billion for GrubHub.

Grubhub, based in Chicago's Loop, provides an online and mobile platform for restaurant pick-up and delivery orders. It has a network of more than 50,000 restaurants, nearly 9 million active diners and an annualized run rate of $3 billion in gross food sales.

Amazon, which is now focused on food delivery following the Whole Foods deal, could leverage GrubHub's delivery infrastructure in its grocery-delivery efforts, the analyst noted.

Turner wrote in a research note to clients, "If [Amazon] wants to truly dominate food delivery the choice is clear — gobble up GrubHub."

It was on June 16 that Amazon said it has agreed to buy grocery chain Whole Foods Market for $13.4 billion, as the online retailing giant aims to dominate supermarket industry as well.

Turner noted that Whole Foods has large store footprints in most of GrubHub's key geographies, including California, Massachusetts, Illinois and New York.

In the note titled "WFM the Main Course, GRUB for Dessert?", Turner wrote, "A combination of WFM and GRUB would give AMZN significant competitive positioning on in-home meal consumption regardless of whether the meal was prepared in home or at a restaurant."

This is said to give grocery customers the ability to do more just-in-time grocery ordering, which could increase usage.

Turner reiterated his $50 share price target on GrubHub and kept his rating at outperform.