Should I buy Delivery Hero stock after Glovo acquisition?

Should I buy Delivery Hero stock after Glovo acquisition?
Written by:
Michael Harris
22nd September, 13:51
Updated: 22nd September, 13:52
  • Delivery Hero to acquire the LatinAm operations of Glovo, a Spanish on-demand delivery service
  • The German company will pay up to €230 million, including a €60 million performance-based bonus
  • A close above 92.00 in DHER stock could generate a buying opportunity

Shares of Delivery Hero SE (ETR: DHER) gained over 4% today after the Germany-based online food delivery firm agreed to acquire the LatinAm operations of Glovo, a Spanish on-demand delivery service. 

Fundamental analysis: Food delivery business booming

Delivery Hero will pay up to €230 million and acquire more than 8 markets, including a €60 million performance-based earn-out. The deal is expected to be completed over the next few weeks and will cover all of the Glovo’s businesses in Latin America including Argentina, Peru, Ecuador, Panama, Costa Rica, Honduras, Guatemala and the Dominican Republic.

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The Spanish on-demand courier service already left two LatAm markets at the start of 2020, saying it plans to put more emphasis on markets where it could develop and become one of the top delivery service providers. It also pulled out of the Middle East. 

After the deal is completed, Glovo will have a total of 14 markets and will be able to focus more on the ones in Europe. 

“This deal will allow us to strengthen our presence in those markets where we are already very strong, while also allowing us to invest in new markets where we see huge growth potential and opportunity.

“We truly believe that Delivery Hero is the best possible partner to take the business we’ve built in Latin America to the next level. They have everything it takes to go on and become the leading player in the region,” said Oscar Pierre, the Chief Executive of Glovo.

A deal will provide Delivery Hero with 5 new markets in Latin America and eliminate a main competitor in three markets. 

The company reported in July that its orders grew by about 100% in the second quarter.

Technical analysis: Shares rise

Delivery Hero share price rose over 4% today to trade above 94.00 once again. The stock price is now attempting to erase all monthly losses and potentially stage another bullish run.

Delivery Hero stock weekly chart (TradingView)

In this case, the target for the buyers would be the descending trend line – which connects two swing highs – at 103.80. The all-time high, set in July, comes at 106.20. 

Given that the number of daily infection cases is on the rise again, the online food delivery is likely to see another boost in orders. Today’s close above 92.00 in DHER would offer an opportunity to invest in the stock and target new record highs. 

Summary

German food delivery services provider Delivery Hero announced it will acquire Glovo’s operations in Latin America for roughly €230 million. Shares are trading higher as a result as the buyers aim for the return to all-time highs. 

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