• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Technology

Many Cash-Rich Tech Firms Look Poised to Get Stronger in This Environment

In fields ranging from food delivery to e-commerce to enterprise software, deep-pocketed tech firms look strategically advantaged right now.
By ERIC JHONSA
Mar 23, 2020 | 08:09 PM EDT
Stocks quotes in this article: UBER, GRUB, AMZN, MSFT, CRM

In an environment where cash is king, cash-rich tech companies could gain ground against -- and in some cases, acquire -- more financially-constrained rivals that are seeing meaningful cash burn.

The U.S. restaurant delivery market, a field that was awash in red ink and widely expected to see consolidation even prior to the COVID-19 outbreak, could prove to be a good case in point. With the funding environment for money-losing, late-stage startups now much tougher, Uber  (UBER) and GrubHub (GRUB)  now appear to be in stronger strategic positions relative to privately-owned rivals DoorDash and Postmates.

During a March 19 business update call, Uber disclosed that it had about $10 billion in cash at the end of February, and forecast that even if its ride-sharing business was down 80% for the rest of 2020, it would exit the year with $4 billion in cash, along with access to a $2 billion credit revolver. In a scenario that involves the ride-sharing business bottoming in Q2, Uber expects to end the year with about $6 billion in cash.

GrubHub ended 2019 with over $400 million in cash, and (with the help of its takeout-ordering business) was forecasting positive 2020 adjusted EBITDA before the COVID-19 pandemic took hold.

By contrast, DoorDash and Postmates were both losing money going into 2020. DoorDash, which has confidentially filed for an IPO that now looks unlikely to happen in the near-term, was reported in December to be projecting a $450 million 2019 operating loss. Postmates, easily the smallest of the four main U.S. restaurant delivery players, carried out layoffs last fall in an attempt to strengthen its bottom line.

E-commerce is another area where a deep-pocketed player -- namely, Amazon.com (AMZN)  -- is likely to strengthen its hand over the next few months. During a time in which weaker consumer spending is set to weigh on the sales of many of the direct-to-consumer startups that avoid selling on Amazon and rely heavily on Facebook, Instagram and Google ads to promote themselves, Amazon can afford to hire another 100,000 workers to help deal with swelling orders for groceries and other consumer staples.

Enterprise software, meanwhile, is an area where larger players might not necessarily gain a lot of share against smaller players in the short-term. Not when salespeople and systems integrators in general are unable to physically meet potential clients.

However, it's also an area where it's pretty normal for smaller, growth-stage firms to be burning cash. And in an environment such as this one, many of these growth-stage companies could both see their cash burn worsen and new funding prove more difficult to come by (or at least come with much less favorable deal terms than would have been the case a short while ago).

As a result, should a bigger, cash-rich, cash-flow positive peer such as Microsoft ( MSFT) or Salesforce.com  ( CRM) express buyout interest, some of these companies could be more willing to listen than they would have been in, say, January.
Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.
TAGS: Investing | Technology

More from Technology

Apple Is Far Better Positioned Than Amazon or Alphabet: Here's the Trade

Stephen Guilfoyle
Feb 3, 2023 12:20 PM EST

One thing is clear: Apple's disappointments are far more correctable, and their cash flow is more diversified than either AMZN or GOOGL.

Amazon Shares May Have Run Too Far, Too Fast

Bruce Kamich
Feb 3, 2023 10:20 AM EST

Here's the key for trading the stock right now after earnings.

Meta Did Not Follow My Script

Bruce Kamich
Feb 2, 2023 10:17 AM EST

I feel I must raise my hand like I committed a foul.

Is the Market Getting Too Technical?

Helene Meisler
Feb 2, 2023 6:00 AM EST

We're not yet at an either/or market yet, and maybe we won't get there, but the action is starting to look a little be familiar. Let's check the indicators.

Here's Our Trading Strategy for DXC Technology

Bruce Kamich
Feb 1, 2023 1:40 PM EST

We've got a plan for the IT services company.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 02:58 PM EST REAL MONEY

    Sarge Guilfoyle Breaks Down the Jobs Report, Fed Policy and Stocks!

    Watch it here!
  • 11:35 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Trading an Irrational Market
  • 02:10 PM EST REAL MONEY

    Fed Rate Decision

    Fed Lifts Benchmark Rate by 25 Basis Points, Sees ...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login