6 Stocks Taking a Bite of the Food Delivery Sector

I had been cooking dinner with my grandmother since I was old enough to stand on a stool and help in the kitchen.

Once my food allergies were discovered as an adult, it made sense for me to take over the family dinner.

I used to host 15 or more people on Thanksgiving. Years later, we no longer do the big celebration … but I tend to overcook even when it’s just me and my boyfriend.

This year was no different.

Here I was the Tuesday before Thanksgiving looking for a can of gluten-free French-fried onions to top my green bean casserole.

I checked my usual stores and came up with nothing. But then I got an idea, I could search on Instacart.

To make a long story short, I ended up ordering them from Sprouts along with three other items to qualify for free shipping.

However, once my order arrived at my house, I received a text saying that the one item that sparked the whole order was not available.

I forgot how easy the whole ordering groceries experience could be. And the delivery fees were nowhere near as high as I remembered. Then I remembered that Instacart was supposed to go public.

I was surprised to see that Instacart has decided to delay its IPO after hinting that the company would list shares in Q4. The company’s management wants time to strengthen its services for grocery retailers beyond delivery.

According to the report “U.S. Digital Grocery Forecast 2021” …

• 5% of the U.S. population will make a digital grocery purchase this year.
  
  
• Digital grocery sales in the U.S. rose 63.9% in 2020 and are expected to grow another 12.3% this year.

And Instacart is profiting from that growth. But alas, we can’t get in just yet.

So instead, I headed on over to Weiss Ratings to see how some of its competitors were faring.

Big Players Who Added Grocery Delivery

1. Walmart (NYSE: WMT) has been quick to adapt to its consumers. Did you know that in Mexico, where nearly everyone uses WhatsApp, Walmart allows consumers to text their grocery order? They don’t even have to type out the list. It’s as simple as sending a picture of a handwritten grocery list through the messaging app.

Here is the U.S., the cost for Walmart grocery delivery ranges from $7.95-$9.95. Delivery minimums and delivery times vary by region.

•  And unlike some other services, Walmart doesn’t have a markup; you get the same prices that in-store shoppers would.

Walmart was recently downgraded from a “B” to a “B-” and I’ll be curious if that trend continues. Shares are down 8% over the past year, but up 19% over the past two years. Plus, the company pays a dividend of 1.5%.

2. Amazon.com (Nasdaq: AMZN) has groceries listed from all over on its site. My family in particular has loved all the “interesting” things I like to find and cook for them. (The quotation marks imply their sarcasm.)

Plus, there’s both Amazon Fresh and Whole Food delivery if you live in certain areas. Amazon is a retail giant across hundreds of categories, and the grocery landscape is no exception.

The company has primarily stayed in the “B” range since 2018 with a handful of drops to a “C+”. Shares are up 8% over the past year, and 96% over the past two years.

3. Target (NYSE: TGT) operates over 1,897 stores throughout the U.S. But you might not know that the company acquired Shipt back in 2017 for $550 million in order to accelerate its digital fulfillment efforts. Since Shipt still operates as a separate entity, shoppers can also use it to order groceries and household essentials from a variety of stores.

Like Walmart, Target is a retail behemoth. Some people prefer Walmart, and some people prefer Target. But there’s no doubt that the Shipt investment is now paying off for Target.

The company has primarily stayed in the “B” range since 2019 with a handful of dips to a “C+”. Shares are up 39% year to date and 104% over the past two years.

Food Delivery Apps

1. Just Eat Takeaway.com (Nasdaq: GRUB) is the combination of Just Eat Takeaway (JET) and Grubhub. The completion of this deal allowed JET entry into the online food delivery market in the U.S., which has skyrocketed since the beginning of the pandemic.

Now the company is built around four of the world’s most attractive markets in online food delivery: the U.S., the U.K., the Netherlands and Germany.

This all seemed like a good idea at the time. But now, after the company’s lackluster forecast in October, a big investor is openly urging the company to cut Grubhub loose.

The company has been in the “D” range since we started rating it back in September. Shares are down 12% in the past week and 33% year to date.

2. DoorDash (NYSE: DASH) was founded in 2013 and is headquartered in California. The company continues to partner not just with food companies but with businesses all over to offer same-day delivery. Just earlier this month, it added Ulta Beauty (Nasdaq: ULTA) to that list.

The company also just announced that it will acquire technology company Wolt. Partnering with this Helsinki-based company creates the opportunity of a global platform for local commerce in the internet era. This makes for a second company that will be part of a global mission.

•  I’ll definitely be adding this one to my watch list.

This company has also been in the “D” range since we started rating it back in March. Shares are down 21% in the last week, but still up 21% year to date.

3. Uber Technologies (NYSE: UBER) released “The 2021 Uber Eats Cravings Report” earlier this month. It contained such fun facts as weekends being the most popular days to order delivery with the 5 p.m.-7 p.m. time frame being the most popular. And that bananas are the #1 selling grocery item in the United States.

It also included interesting requests that they’ve seen … and it is worth a read if you want a laugh. But I’m not quite sure I’ll be investing in Uber anytime soon. The company has been either “D” or “E” rated since we started rating it back in 2019. Shares are down 16% in the past week and 27% year to date.

There’s no doubt that this is a trend to keep on your radar and a trend that found great acceleration during the pandemic. It has staying power for consumer habits. We’re even seeing well-funded startups still trying to grab a foothold.

I know I’m going to add these companies to my watchlist. If they start climbing up the ratings, there could be an incredible opportunity to profit.

Best,

Kelly Green