Why Uber Technologies Stock Jumped 7% Today

What happened

Shares of Uber Technologies (NYSE:UBER) rose 7% on Tuesday after the company announced it had agreed to acquire alcohol delivery service Drizly for $1.1 billion in cash and stock. The on-demand booze delivery provider will become a wholly owned subsidiary of Uber and will eventually be integrated with the Uber Eats app.

So what

Drizly is a leading player in the space, serving thousands of local merchants in over 1,400 cities by delivering beer, wine, and spirits to consumers. But Uber will not be acquiring Drizly’s cannabis delivery business.

Bloomberg reports that prior to agreeing to the deal with Uber, Drizly had spoken with both DoorDash and goPuff, a delivery service that recently acquired alcoholic beverage retailer BevMo!

Image source: Drizly.

Now what

Uber is expected to report earnings next week, and because of the continuing impact of the pandemic, analysts are bullish on the ridesharing app turning in an upbeat quarter because it has differentiated itself from its peers with food delivery.

Adding alcohol delivery to the mix should be a major boost to its business. During the depths of the coronavirus outbreak last May, its sales quintupled over historical levels.

Uber CEO Dara Khosrowshahi said Drizly has profitably grown gross bookings more than 300% year over year.

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“That’s why we’ve been branching into new categories like groceries, prescriptions, and, now, alcohol,” he said.

About 90% of the purchase price for Drizly will be in Uber stock, with the balance in cash. The deal is expected to close in the first half of 2021.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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