Key Analyst Sees Buying Opportunity at GrubHub
As GrubHub continues to grow and expand into more local markets, analysts are taking note, and their reaction has been good despite a weak performance on the year.
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Pushing the envelope for convenience, GrubHub Inc. (NYSE: GRUB) is a huge presence in the food delivery market. As it continues to grow and expand into more local markets, analysts are taking note, and their reaction has been good despite a weak performance on the year.
Oppenheimer has a Buy rating and a $50 price target, which implies 60% upside from current levels.
The firm sees the pullback in shares since the first-quarter earnings report as a buying opportunity. It believes the initial pullback reflected concerns over margin pressure from investments in a delivery network, as well as competition from Uber.
This was followed by weak Google Trends data, which correlates with orders, but is not a useful predictor for the second quarter, according to Oppenheimer.
GrubHub’s investment in a software-powered delivery network is a key to expansion into smaller markets, in the opinion of the brokerage firm. While urban markets may have many delivery people, most suburban restaurants do not, limiting the opportunity for delivery.
While competition from Yelp, Uber and others will increase, it is very hard to scale all three sides of the pyramid (consumers, restaurants and delivery). In addition, the current Uber delivery product is restricted to automobiles, with limited food options from restaurants.
GrubHub has multiple ways to drive orders, including daily discounts and push notifications. In addition, app updates could improve the user experience and drive orders.
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Other analysts were fairly positive on the company as well:
- Sterne Agee CRT reiterated a Buy rating with a $56 price target.
- Northland Securities initiated coverage with an Outperform rating and a $40 price target.
- Guggenheim initiated coverage with a Buy rating.
- Raymond James reiterated a Buy rating with a $45 price target.
Shares of GrubHub were up 0.6% at $31.76 on Friday. The stock has a consensus analyst price target of $48.47 and a 52-week trading range of $29.68 to $47.95. GrubHub shares are down 12% in the past two weeks and 13% year to date.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
