Shares of Grubhub (GRUB) seesawed Friday as Amazon (AMZN) said it will expand its online food ordering and delivery business through a partnership with Olo.
X Olo provides an online food ordering and delivery platform, saying it has an "exclusive network" of more than 200 restaurant brands across 40,000 locations and with more than 60 million customers. Its says its clients include Chipotle (CMG). Shake Shack (SHAK) and Wingstop (WING).
"This integration will enable Amazon Restaurants to onboard new restaurants with ease, as well as quickly add more new choices and delivery options for customers," Gus Lopez, general manager of Amazon's restaurant division, said in a prepared statement.
Grubhub shares fell 3.4% to close at 51.69 on the stock market today. The shares were down more than 5% earlier in the day.
Grubhub is the market leader in online food-delivery services, with a market share estimated by Cowen to be 34%, followed by Uber Eats at 20%, Eat24 at 16% and Amazon at 11%.
Analysts have expressed concerns that the expansion of Amazon and other competitors in the field of restaurant food-delivery services will raise customer acquisition costs and lower Grubhub profit.
IBD'S TAKE: Grubhub is currently one of nine companies on the exclusive IBD Leaderboard platform, a premiums service to help readers pick growths stock. Grubhub stock is up 45% this year but its drop below the 50-day moving average today sends a warning signal for investors.
Last month Grubhub announced it would pay $287.5 million in cash to acquire Yelp's (YELP) online food ordering and delivery business, Eat24. Also in early August, Grubhub and Groupon (GRPN) forged a strategic partnership to bring food delivery to Groupon customers across the U.S. In June, Grubhub acquired Foodler, a Boston-based rival, for an undisclosed amount.
The scary thing for Grubhub is that Amazon is gaining rapid traction in the food-delivery category despite the fact that its "still acting rationally and not aggressively pricing," said a report from Morgan Stanley in June.
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