Can GrubHub stock recover after recent decline?
GrubHub (GRUB) stock has fallen over 36.5% this month, and the stock closed trading at $87.95 on October 26, which is 41% below its 52-week high of $149.35. GrubHub reported third-quarter revenue of $247 million, a rise of 52% year-over-year and above estimates of $238.5 million. Earnings per share rose 72% to $0.45, which was above estimates of $0.41.
GrubHub revenue was driven by a 67% increase in the number of Active Diners, which reached 16.4 million. The company’s gross food revenue rose 40% to $1.2 billion. GrubHub reported EBITDA of $60.1 million, a rise of 41% YoY.
While growth looks solid, analysts were not impressed with GrubHub’s forecast for a 12% to 30% decline in EBITDA for the fourth quarter. Analysts expected EBITDA to rise 30%.
Competition from Uber Eats
GrubHub has to significantly increase sales and marketing expenses to maintain its lead in the domestic food delivery market. According to Edison Trends, GrubHub led the food delivery market in the United States with a share of 34.4% followed by Uber Eats at 27.9% and DoorDash at 17.9%.
Uber Eats is planning to gain traction in the food delivery market, which might lead to a price war between the two companies. The food delivery market in the United States is estimated to grow from $43 billion in 2017 to $76 billion in 2022, according to estimates by Cowen analyst Andrew Charles.
GrubHub is also estimated to grow revenue by 47.5% in 2018 and 32.2% in 2019. The recent price correction might provide an investment opportunity. Analysts have an average 12-month target price of $126 for GrubHub, indicating an upside potential of 43% for the stock.
Out of the 25 analysts tracking GrubHub, 17 recommend a “buy,” seven recommend a “hold,” and one recommends a “sell.”