The food delivery industry has truly boomed since the start of the Covid-19 pandemic. As we approach 2022, cases and hospitalizations may be decreasing, but America’s reliance on the companies that kept them fed has not. This is clearly the case throughout international markets, as reflected by a recent acquisition on the part of an industry giant. DoorDash (NYSE:DASH) has announced that it will be acquiring Finland-based food delivery app Wolt in an $8 billion stock deal. Wall Street is buzzing as DASH stock shoots up amid the deal’s mixed reception.
What’s Happening With DASH Stock
News of the deal broke late yesterday and since markets opened this morning, DASH stock has surged by more than 14% in the first hour of trading. This news comes after a difficult week, during which the stock had gradually declined by almost 10%. October 2021 proved quite turbulent for DASH, but with today’s gains, the stock is up by more than 12% for the month. It shows no signs of slowing down today.
It’s certainly not a bad day to be joining forces with a food delivery company that’s well established in a European market. Wolt’s publicly traded peers are enjoying an excellent day so far, with Netherland-based Just Eat Takeaway (NASDAQ:GRUB) and Germany’s Delivery Hero (OTCMKTS:DLVHF) up 1% and 3% so far.
Why It Matters
This type of strategic acquisition makes a lot of sense for DoorDash. The company has long been trying to gain a foothold in European markets in attempt to keep pace with its primary rival, Uber Eats (NYSE:UBER). DoorDash has done a great job gaining a market share in the U.S., but until now, Uber Eats has had a significantly broader global reach, offering its services in more than 45 countries. Wolt is based in Finland, but its reach expands into 23 other countries including Greece, Azerbaijan and Kazakhstan.
That doesn’t mean that international expansion doesn’t come without its challenges, though. Prior to the pandemic, Uber Eats was forced to abandon attempts to expand into China and Russia, although their exits ended up being highly profitable. Martin Peers raised concerns about the deal in his daily newsletter, The Briefing, arguing that there are smarter ways to gain global reach that don’t require spending $8 billion.
What It Means
Peers is right that DoorDash will face challenges ahead. That said, the company has plenty of incentive to rise to meet them all. Its Q3 earnings came it at $1.3 billion, far enough below Uber’s $2.2 billion for it to matter. Additionally, Wolt is a respected and well established company with plenty of staff and personnel to help make the transition smoother.
InvestorPlace‘s Josh Enomoto recently named DoorDash to a list of sharing economy stocks that are still worth buying, arguing that the pandemic might have served to boost DASH stock as well as others like it. As he noted, it has been reported that the trend of customers taking advantage of food delivery services has only increased.
As experts discuss the end of the pandemic and work and culture trends prepare to shift again, DASH stock is absolutely worth watching, particularly as it incorporates Wolt into its global operations.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
