Uber Technologies (UBER) is expanding its delivery footprint. The company announced a partnership with Flytrex, an Israeli drone-delivery firm, to deliver food to customers. The ride hailing giant plans to roll out a pilot program in select Uber Eats pilot markets by the end of the year. Following the news, UBER stock gained about 2% on Thursday.
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This move aligns with Uber’s goal to build a “flexible, multimodal delivery network,” beyond traditional cars, bikes, and couriers to include autonomous robots and now, drones.
As part of the deal, Uber will also invest in Flytrex to speed up the development and deployment of drone delivery technology. The specific investment amount was not disclosed.
Deal Helps UBER Move Past a Key Hurdle
It is worth mentioning that Flytrex has completed over 200,000 meal deliveries to suburban homes. Also, it has received approval from the Federal Aviation Administration (FAA) for Beyond Visual Line of Sight (BVLOS) operations.
This allows their drones to be monitored from a centralized operations center, rather than requiring on-site visual observers.
By partnering with Flytrex, which already has this regulatory approval, Uber can grow its drone delivery service faster than if it had built the technology and sought approval in-house.
This is not Uber’s first venture into drone delivery. The company previously tested McDonald’s (MCD) delivery with an in-house aerial arm, Uber Elevate, back in 2019. However, that program faced regulatory hurdles, and later, Uber sold the division during the pandemic to cut costs.
The move also reflects a broader industry shift. Rivals such as DoorDash (DASH) and Chipotle (CMG) are already testing drone deliveries in Texas. Thus, the competition to lead in air-based delivery seems to be picking up speed.
Is UBER a Buy or Sell Right Now?
Turning to Wall Street, analysts have a Strong Buy consensus rating on UBER stock based on 26 Buys and four Holds assigned in the past three months. Further, the average UBER price target of $109.59 per share implies 15.72% upside potential.
