In this article, we discuss the 11 best delivery stocks to buy now.
Delivery stocks have jumped into the spotlight as supply chain disruptions lead to inflation and businesses scramble to identify reliable players in the industry to handle the crisis. The pandemic has forced companies to turn towards automation in deliveries and the drone package delivery market is exploding. Companies are competing for faster delivery times and third-party applications that focus just on delivery have fetched valuations worth billions of dollars. The online food delivery market alone is expected to grow to $128 billion by 2027.
Some of the best delivery stocks to buy now include Amazon.com, Inc. (NASDAQ:AMZN), Uber Technologies, Inc. (NYSE:UBER), and Walmart Inc. (NYSE:WMT), among others discussed in detail below. Mergers and acquisitions in the industry are also on the rise as competition becomes fierce. Labor shortages have hit delivery stocks in recent weeks but these shortages are expected to decrease in 2022.
Our Methodology
The companies that operate in the delivery sector were selected for the list through a careful assessment of business fundamentals and analyst ratings to provide readers with some context for their investment choices.
Hedge fund sentiment was included as a classifier as well. The hedge fund sentiment around each stock was calculated using the data of 867 hedge funds tracked by Insider Monkey.
Photo by Brett Jordan on Unsplash
Best Delivery Stocks To Buy Now
11. Blue Apron Holdings, Inc. (NYSE:APRN)
Number of Hedge Fund Holders: 12
Blue Apron Holdings, Inc. (NYSE:APRN) delivers original recipes and fresh ingredients. The stock has soared amid interest from retail traders on Reddit in the last few months. Blue Apron Holdings, Inc. (NYSE:APRN) shares are up over 20% in the past year despite an earnings miss in the third quarter. Blue Apron Holdings, Inc. (NYSE:APRN) plans to increase marketing spend in the coming months as part of a strategy to drive customer growth.
Analysts expect slow progress on these growth initiatives since food and logistics costs are likely to be more pressing concerns for Blue Apron Holdings, Inc. (NYSE:APRN) in 2022. 12 hedge funds in the database of Insider Monkey were long Blue Apron Holdings, Inc. (NYSE:APRN) at the end of September with stakes worth $11 million.
Just like Amazon.com, Inc. (NASDAQ:AMZN), Uber Technologies, Inc. (NYSE:UBER), and Walmart Inc. (NYSE:WMT), Blue Apron Holdings, Inc. (NYSE:APRN) is one of the stocks that hedge funds are buying.
10. Just Eat Takeaway.com N.V. (NASDAQ:GRUB)
Number of Hedge Fund Holders: 18
In late November, JPMorgan analyst Marcus Diebel upgraded Just Eat Takeaway.com N.V. (NASDAQ:GRUB) stock to Overweight from Neutral with a price target of GBP 8,632, identifying valuation as the primary reason behind the upgrade and backing food delivery stocks to have strong partner sign-ups in the coming months. The analyst underlined that the risk/reward associated with Just Eat Takeaway.com N.V. (NASDAQ:GRUB) had “materially turned”.
Deutsche Bank also recently issued a Catalyst Call Buy on Just Eat Takeaway.com N.V. (NASDAQ:GRUB) stock with analyst Silvia Cuneo saying that even in-line results for the fourth quarter would satisfy the market with regards to growth plans of Just Eat Takeaway.com N.V. (NASDAQ:GRUB) beyond the pandemic.
9. Papa John’s International, Inc. (NYSE:PZZA)
Number of Hedge Fund Holders: 33
Papa John’s International, Inc. (NYSE:PZZA) owns and runs pizza delivery restaurants across the world. The firm posted earnings for the third quarter in early November, beating market estimates on earnings per share and revenue by $0.12 and $11 million respectively. Papa John’s International, Inc. (NYSE:PZZA) also declared a quarterly dividend of $0.35 per share, in line with previous. Papa John’s International, Inc. (NYSE:PZZA) has a decent dividend history with eight consecutive years of payouts to shareholders.
Hedge funds also like Papa John’s International, Inc. (NYSE:PZZA) stock. 33 hedge funds in the database of Insider Monkey held stakes worth $744 million in Papa John’s International, Inc. (NYSE:PZZA) at the end of September.
In its Q3 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and Papa John’s International, Inc. (NYSE:PZZA) was one of them. Here is what the fund said:
“Papa John’s is a global operator and franchisor of pizza delivery and carryout restaurants. The company is tracking nicely against our turnaround thesis which hinges upon an improvement in store-level economics leading to accelerating growth in restaurant development activity. Improved store-level economics is being driven in part by market share gains resulting from menu innovation. New menu items—parmesan crusted Papadias, Epic Stuffed Crust, Shaq-a-roni— coupled with enhancements to the digital/loyalty platform and supportive advertising are attracting new customers to the brand, increasing frequency of its existing customers and driving higher unit volumes and returns. As a result, the company is experiencing incremental interest from new and existing franchisees to develop new restaurants. Papa John’s opened a record 123 units in the first half of 2021 and now expects to open 220-260 new stores this year (vs. 140-180 previously)—most of which are outside of the US. Combined with ample white space globally, we believe a higher unit growth trajectory will drive an attractive and sustainable profit cycle.”
8. Domino’s Pizza, Inc. (NYSE:DPZ)
Number of Hedge Fund Holders: 36
Domino’s Pizza, Inc. (NYSE:DPZ) is one of the most reliable stocks in the delivery sector with eight years of consecutive and increasing dividend payouts. Argus analyst John Staszak recently raised the price target on Domino’s Pizza, Inc. (NYSE:DPZ) stock to $640 from $520 and kept a Buy rating, underlining that the firm was spending aggressively on ecommerce as online sales soared, accounting for nearly 70% of total revenue in the US.
Domino’s Pizza, Inc. (NYSE:DPZ) has profit margins that are higher than most peers, and as the pizza market grows, so will the profits for the company. International expansion is also an area where Domino’s Pizza, Inc. (NYSE:DPZ) holds a significant advantage compared to the competition as a new fiscal year begins.
In its Q3 2021 investor letter, LRT Capital Management, an asset management firm, highlighted a few stocks and Domino’s Pizza, Inc. (NYSE:DPZ) was one of them. Here is what the fund said:
“Domino’s Pizza is the world’s largest franchisor of pizza restaurants with over 13,800 locations in 85 countries. As for any restaurant operator, the key metric to consider for Domino’s Pizza is same-store-sales (SSS) growth. Growing same-store-sales are ultimately how a restaurant business increases earnings from its existing assets. The company continues to impress in this criterion with SSS having grown in the U.S. for 40 consecutive quarters, and an astounding 109 straight quarters internationally.
Two-thirds of the company’s stores are currently abroad, and the international segment remains the company’s largest growth opportunity, as the penetration of convenient fast food remains lower abroad than in the United States. Pizza is a product with exceptionally high gross margins, one that “translates” well across different cultures, and one that literally “travels well”, not losing much of its appeal when delivered in a cardboard box. The rise of 3rd party delivery platforms such as Uber Eats, Doordash and Grubhub is challenging the pizza category as it has expanded the number of choices consumers have for convenient takeout. However, the economics of food delivery remain challenging for most restaurants and platforms alike51, while pizza delivery continues to be highly profitable. Regardless of how the “delivery wars” currently playing out end, Domino’s financial results show little impact of this increased competition, and the company continues to deliver exceptional financial performance.
Domino’s Pizza stock is not optically cheap based on forward earnings, however, the company has routinely reported earnings growth of over 20% in almost all quarters since 2009. Given the company’s high growth rate, international growth opportunities, and capital light business model, which allows for returns on invested capital of over 40%, we are happy to continue to hold the shares.”
7. United Parcel Service, Inc. (NYSE:UPS)
Number of Hedge Fund Holders: 42
United Parcel Service, Inc. (NYSE:UPS) also has an impressive dividend history stretching back more than a decade. In early November, United Parcel Service, Inc. (NYSE:UPS) declared a quarterly dividend of $1.02 per share, in line with previous. The forward yield was 1.94%. The company hired over 60,000 seasonal workers ahead of the holiday season last year to keep up with the business demands as competitors complained of labor shortages and delays.
Top hedge funds have consistently backed United Parcel Service, Inc. (NYSE:UPS) over the years. New York-based Renaissance Technologies is a leading shareholder in United Parcel Service, Inc. (NYSE:UPS) with 854,700 shares worth more than $155 million.
In its Q2 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and United Parcel Service, Inc. (NYSE:UPS) was one of them. Here is what the fund said:
“We funded the shift primarily with trims in UPS following big gains in this name. UPS is a long-term holding that have been and remain core holdings. During the quarter, however, we took gains and resized the positions to reflect their current risk-reward post strong increases in the stocks.
UPS too has been a core, long-term holding. For many years its stock languished alongside fundamental performance that was both uneven and often uninspiring. Since Carol Tomé took the reins last summer and capitalized on COVID-19-related freight disruptions, UPS’s earnings have soared, and the stock has followed suit. We trimmed the position toward the end of the quarter despite continued near-term momentum and an undemanding valuation multiple. This trim reflects the longerterm risk, though hard to quantify, that Amazon may become a full-fledged competitor and meaningfully disrupt the dynamics of the industry. While not our base case, this risk cannot be disproven. We continue to be very bullish on UPS’s near-term outlook and optimistic about its longer-term outlook, while also continually looking over our shoulder to make sure Amazon is not on our heels.”
6. DoorDash, Inc. (NYSE:DASH)
Number of Hedge Fund Holders: 42
UBS analyst Lloyd Walmsley has a Neutral rating on DoorDash, Inc. (NYSE:DASH) stock with a price target of $200. In a recent investor note, the analyst backed the firm to grow gross orders in the coming months but cautioned that the growth was already priced into the shares. DoorDash, Inc. (NYSE:DASH) has rapidly grabbed market share in the food delivery space from competitors since debuting on the market in late 2020. DoorDash, Inc. (NYSE:DASH) recently also announced that it had purchased Helsinki-based food-delivery startup Wolt in a deal worth more than $8 billion. Tony Xu, the CEO of DoorDash, Inc. (NYSE:DASH), said that the purchase was part of a vision of the firm to build a global platform for local businesses.
DoorDash, Inc. (NYSE:DASH) has also started offering 15-minute grocery deliveries in select areas of New York as it seeks to further improve the brand name as the “fastest” in the food delivery business.
In addition to Amazon.com, Inc. (NASDAQ:AMZN), Uber Technologies, Inc. (NYSE:UBER), and Walmart Inc. (NYSE:WMT), DoorDash, Inc. (NYSE:DASH) is one of the stocks that elite investors are keeping an eye on.
5. Target Corporation (NYSE:TGT)
Number of Hedge Fund Holders: 49
BMO Capital analyst Kelly Bania has an Outperform rating on Target Corporation (NYSE:TGT) stock with a price target of $275. The analyst believes that Target Corporation (NYSE:TGT) has made a “prudent” decision to invest in the customer and value for the long-term, something that would help the firm accelerate share gains in the consumables sector. The analyst also lauded the same-day delivery service of Target Corporation (NYSE:TGT), citing it as a key to a loyal and growing customer base.
GQG Partners is a leading shareholder in Target Corporation (NYSE:TGT) with 5.5 million shares worth more than $1.2 billion. Of the 867 funds tracked by Insider Monkey, 49 own a stake in Target Corporation (NYSE:TGT). The combined worth of these stakes is $4.3 billion.
In its Q2 2021 investor letter, Nelson Capital Management, an asset management firm, highlighted a few stocks and Target Corporation (NYSE:TGT) was one of them. Here is what the fund said:
“We added Target (tkr: TGT) to our consumer staples sector. Target offers a broad array of products in owned and known brand items at affordable prices. Its omnichannel fulfilment centers allow customers to receive their items via in-store pickup, curbside pickup, same-day shipping and regular shipping while simultaneously reducing operating costs. With a significantly lower valuation than peers and a unique operating strategy, Target is an attractive holding.”
4. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 71
Walmart Inc. (NYSE:WMT) stock has attracted the attention of investors in the past few months as a value offering in an inflationary environment. Walmart Inc. (NYSE:WMT), one of the largest retailers in the US, has surprised analysts by capturing market share from ecommerce giant Amazon in the retail space with growth of the online business. However, Amazon is still on track to become the largest retailer in the US in 2022 on the back of strong holiday sales. With online sales and international presence both increasing, Walmart Inc. (NYSE:WMT) could give Amazon tough competition in the retail sector in the next few months.
Walmart Inc. (NYSE:WMT) has been a hedge fund favorite for many years due to strong fundamentals and an impressive dividend history stretching back nearly five decades. Washington-based investment firm Fisher Asset Management is a leading shareholder in Walmart Inc. (NYSE: WMT) with 13 million shares worth more than $1.8 billion.
3. Shopify Inc. (NYSE:SHOP)
Number of Hedge Fund Holders: 73
Shopify Inc. (NYSE:SHOP) is a Canadian ecommerce company that is growing dealings with merchants and subscription revenues rapidly. It offers businesses a whole ecosystem within which to operate, a distinction that has helped it differentiate itself from other ecommerce firms. Analysts expect Shopify Inc. (NYSE:SHOP) to beat revenue expectations in the fourth quarter and point to a potential 25% upside in the shares in the coming months.
Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Lone Pine Capital is a leading shareholder in Shopify Inc. (NYSE:SHOP) with 1.4 million shares worth more than $1.9 billion.
In its Q4 2020 investor letter, RGA Investment Advisors, an asset management firm, highlighted a few stocks and Shopify Inc. (NYSE:SHOP) was one of them. Here is what the fund said:
“While we are pleased with the results of these specific purchases, we made a huge mistake of omission at that time. This mistake will likely be one of the biggest we ever make in our careers. Specifically, we did deep work on Shopify and loved everything about the business qualitatively. Unfortunately, we ultimately found ourselves unable to get comfortable with the numbers.
We built our model up from the key performance indicators (KPIs) that drive revenues. Our last save of the model dated 8/3/2016 looked as follows: (Page 2). These numbers seemed right from everything we understood about the company. While we tend not to rely on sell-side consensus estimates before finishing our own workup of the business, we do give them a look once we feel comfortable with how we have approached our analysis as it is often helpful to get a sense of what the average participant in the market expects the business to do. With Shopify, the sell-side consensus was so far from where our numbers were shaking out, it seemed almost impossible that we were basing our analysis on the same underlying information. Our natural next step was thus to take the sell-side consensus data and work backwards to figure out the implied expectations on each of the key revenue drivers. Here is what the sell-side consensus looked like as at the time: (Page 2).
Shopify’s actual revenues for 2016-2018 ended up being $389m, $673m and $1,073m. In other words, not only were we justifiably far more optimistic than the consensus estimate, but we also were far too conservative in terms of how the company actually performed.
The nature of our job as securities analysts is to take calculated risks, in an uncertain world where the “true” answer is inherently unknowable before the fact. We operate in what many call an “efficient market” and subscribe to the belief that for the most part, markets are generally pretty efficient and it requires differentiated analysis to find a return above what the market can offer. So why did we pass on Shopify despite 1) deeply believing in the qualitative elements of the business; and, 2) seeing a meaningful gap between what we expected and the consensus expected? The answer is unfortunate but simple: we lacked confidence in ourselves. It was the first time we truly experienced such a stark divergence between our expectation and the consensus and the result was the inclination was to pound ourselves over the head with how dumb we must be, rather than the other way around. We also learned that the truly great companies use their strong business advantages, smart management and execution to raise the bar every step along the way. Obviously this is a cycle which cannot continue ad infinitum, but especially in instances where our qualitative work identifies the inherent strengths in the business and the numbers shake out to be quite fair, the consistent “raising of the bar” can be a potent driver for the stock.
Please do not judge us too harshly for our mistake on Shopify, for we have from the very beginning made one commitment above all else to both our clients and ourselves: that we will be better today than we were yesterday, and better tomorrow than we are today. While this mistake was quite costly, it ended up being a key confidence and process builder.”
2. Uber Technologies, Inc. (NYSE:UBER)
Number of Hedge Fund Holders: 143
Uber Technologies, Inc. (NYSE:UBER) operates in the delivery space through the UberEats service. The stock has been among the top picks of hedge funds for several years. Altimeter Capital Management is a leading shareholder in Uber Technologies, Inc. (NYSE:UBER) with 24 million shares worth more than $1 billion.
JPMorgan analyst Doug Anmuth has an Overweight rating on Uber Technologies, Inc. (NYSE:UBER) stock with a price target of $68. The analyst has underlined that internet stocks like Uber Technologies, Inc. (NYSE:UBER) were in a better place at the end of 2021 as compared to pre-pandemic levels, largely because of the digitization of the economy.
RiverPark Advisors, LLC, in its Q4 2020 investor letter, mentioned Uber Technologies, Inc. (NYSE:UBER). Here is what the fund has to say in its letter:
“UBER was also a strong contributor, as shares rallied following the approval of California’s Proposition 22 by voters, allowing the company’s California-based drivers to remain independent contractors (rather than become more expensive employees). We believe this news is not just about the 10%-15% of Uber’s revenue tied to California, but the influence this will have on other states reassessing driver pay. UBER also reported strong third quarter results with Delivery Gross Bookings growing 135% year-over-year which nearly fully offset a reduction in Mobility Gross Bookings, which were down 50% year over year. Total Gross Bookings for the quarter were down only 10% year over year as compared with down 35% last quarter.
Despite the COVID disruption, UBER remains the undisputed global leader in ride sharing (44% of the Company’s third quarter revenue), with greater than 50% share in every major region in which it operates. The company is also a leader in food delivery (46% of revenue), where it is number one or two in the more than 25 countries in which it operates. We view UBER as more than just ride sharing and food delivery, but also as a global mobility platform with the ability to sell to its more than 100 million users (by comparison, Amazon Prime has 130+ million members) and penetrate new markets of on-demand services, such as grocery delivery, truck brokerage and worker staffing for shift work. At its current $96 billion market capitalization, UBER trades at only 6x next year’s revenue from its two core businesses. Additionally, the company has substantial, seemingly unrecognized, value in its several nascent development businesses and another $12 billion in equity stakes in synergistic businesses around the world.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 242
Amazon.com, Inc. (NASDAQ:AMZN) stock has registered minor slumps in the past few months, largely due to a revenue miss. However, some of the drivers of the growth for Amazon.com, Inc. (NASDAQ:AMZN), which include advertising and deliveries, are still showing strong potential. Amazon.com, Inc. (NASDAQ:AMZN) entered the food business with aggressive acquisitions in big markets like India during the pandemic.
Monness Crespi analyst Brian White has a Buy rating on Amazon.com, Inc. (NASDAQ:AMZN) stock with a price target of $4,500. In an investor note, the analyst has backed the firm to benefit from the accelerated digitization of the economy.
In its Q1 2021 investor letter, Hayden Capital, an asset management firm, highlighted a few stocks and Amazon.com, Inc. (NASDAQ:AMZN) was one of them. Here is what the fund said:
“Amazon (AMZN):We sold our last remaining stake in Amazon this quarter. Amazon was our longest-running investment holding, after having originally purchasing it at the inception of Hayden in 2014, at a price of ~$317.
I gave some details of how Amazon has progressed over these past 6.5 years in last year’s Q2 2020 letter, which partners can find here (LINK). The company has executed amazingly well over this tenure, with revenues up ~3.3x and since our initial purchase, and reported operating income up ~30x over that period.
Generally, I believe there are three reasons to sell an investment:1) we recognize our initial thesis is wrong (sell out as quick as possible), 2) we have a significantly higher returning opportunity to redeploy the capital into (sell-down to fund the new investment), or 3) the company is maturing and hitting the top part of it’s S-curve / business lifecycle, so the business has fewer places to reinvest its capital internally. As such, the future returns will likely be lower than the past. This investment thus becomes a “source of capital” in the future, as we fund earlier-stage investment opportunities.
In the case of Amazon, we decided to sell due to the third scenario. I’m sure Amazon will continue to generate value for shareholders and continue to keep pace with the broader technology sector. However, I’m just not confident it’s as attractive an investment as when we first invested.
With ~51% of US households having an Amazon Prime account (and with very low churn), each of these households continuing to increase their annual spend with Amazon, and few / no real competitors in sight, Amazon is a dominant force that will only continue to accrue value as consumers continue to move from offline to online purchases for their everyday needs. Likewise, the “cash-flow machine” of Amazon Web Services is in a similar position of strength, with AWS now having ~32% market share and continuing to grow at +30% y/y. Because of this, I think Amazon is probably one of the safest investments in the technology sector today.
So why did we decide to sell the investment then? Simply put, Amazon is …”read the entire letter here]
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Disclosure. None. 11 Best Delivery Stocks To Buy Now is originally published on Insider Monkey.
