GrubHub stock fell after analysts said it was losing diners
Online food delivery company GrubHub (GRUB) saw its stock tank 8.37% on March 19 after KeyBanc Capital Markets analysts said the company was failing to hold on to customers due to steep competition from Uber Eats and DoorDash.
GRUB has now fallen more than 50% since hitting an all-time high of $149.35 in September 2018. Analysts have given the stock a consensus “hold” rating and a price target of $74.98.
GrubHub has seen increased competition over the last few years, with more and more companies vying for a piece of the pie in the fast-growing food delivery segment. Softbank-backed (SFTBY) Uber has been doubling down on its own food delivery unit, Uber Eats, which has been GrubHub’s biggest competitor.
GrubHub’s revenue growth is robust, but its active diner growth is slowing
GrubHub generated revenue of $287.7 million in the fourth quarter of 2018, a 40.3% rise from the same quarter in 2017. While this growth was still robust, the company had recorded ~50% YoY (year-over-year) growth in the previous four quarters.
The decrease was mostly the result of a slowdown in the number of active diners, which increased only 22% YoY to 17.7 million in the fourth quarter compared to 70% YoY in the second quarter and 67% YoY in the third quarter. The active diner metric is a gauge of future growth, which is why the stock is being punished.
More competition has meant that diners have spent less time on GrubHub than before, which has led to erosion in the company’s market cap.