I am always curious how "big events" impact the value of public companies. This is one of the biggest subreddits and I'd like to hear your thoughts on the latest press release of Domino's.
Domino's Pizza has been delivering its pizza directly through its app. The company entered into a new global agreement with Uber, allowing customers to place orders via Uber Eats and Postmates, with the delivery being done by Domino's drivers.
The question that should be addressed is, "What does this mean for the two companies, and how do they benefit from this partnership?"
Based on the press release, Uber One, and Postmates Unlimited members will receive delivery with no charge on their Domino's orders within the Uber Eats and Postmates platforms.
However, this isn't free. Uber is a company that makes money from the fees it charges for its services. The question is, who bears these costs:
- Customer bears the costs - The demand for Domino's products could decrease (quantity-wise) due to the higher price. However, this depends on the elasticity of the demand, which isn't known yet. Of course, if the customer has an unlimited membership, it is clear that the cost is either by Uber or Domino's.
- If Uber bears the cost (By not charging the fee) - It might add value in the form of more customers, but not in additional revenue. This would bring additional revenue to Domino's. It might seem as a win-win scenario, but it is not sustainable, Uber cannot afford to have a business model of this kind for a long period of time with all of its partners (and historically, that wasn't the case)
- If Domino's bears the cost - This will lead to higher revenue, but lower margins.
After this news, Domino's share price went up over 11%, while Uber's didn't change at all.
It is not surprising that Uber's share price didn't change, as the additional revenue doesn't represent a significant increase when compared to the total revenue it earns.
As for Domino's Pizza, do you think the company is 11% more valuable due to this partnership?
[link] [comments] https://www.reddit.com/r/stocks/comments/14yg0d3/dominos_pizza_dpz_is_up_11_on_the_uber/
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