One of the biggest casualties on Tuesday was a $3 billion food delivery company that lost almost half of its market share in a single trading session. GrubHub (NYSE: GRUB), a company that competes with services like Uber eats and Doordash, saw its share fall by over 40% after failing to meet Wall Street’s expectations. While short-sellers pocket a considerable windfall from the decline, analysts and investors alike are now considering GrubHub to be a sinking ship.
The company announced its recent quarterly results which ended up falling short of Wall Street’s expectations. GrubHub ended up lowering its guidance to just $315 million in comparison to the $368 million polled by analysts. Although the company’s management team promised that they would boost efforts to add non-partnered restaurants to the platform, they also admitted that many restaurants aren’t particularly loyal to a single food delivery platform. To combat this, the company’s chief executive also promised in an analyst call that they would try to invest in their loyalty program, although analysts on the call weren’t particularly impressed with these promises.
“Our teams had another strong quarter of execution, adding nearly one million active diners and 15,000 restaurants to our platform,” said Matt Maloney, Grubhub founder and CEO, in a press release that stressed the positives of the quarter rather than the fact the company missed its earnings estimates. “We are entering the next phase of growth in the U.S. online food ordering industry where it is increasingly important to create a differentiated experience for diners and long-term value for restaurants. We are excited to leverage the robust profitability of our core business and best-in-class restaurant-facing products to grow our two-sided marketplace in a sustainable manner.”
Oppenheimer analyst Jason Helfstein ended up cutting his rating for the stock from a $91 per share to just $34 per share, a drastic decline in an aptly titled report, “Too Many Cooks in the Kitchen.” Another analyst, Brent Thill from Jefferies, went on to say that he sees the food delivery industry as being difficult for individual companies to differentiate in, with customers easily switching from one delivery platform to another.
GrubHub’s management also said that it would try to engage in a price war with other competitors, a move that analysts also were surprised by considering that most of its major rivals had deeper pockets. Both Uber and privately held Doordash are well-funded companies and it’s uncertain how GrubHub’s strategy will pay off.
Shares of the company fell by 42% over the course of Tuesday, the single worst trading day in the company’s history. At this point, many on Wall Street are hoping that a rival will gobble up GrubHub in an acquisition, something which could be the best thing at the moment for the struggling food delivery company.
Grubhub Company Profile
Founded in 2004, Grubhub provides an online takeout food platform for consumers, or diners, and restaurants. The firm generates revenue by charging restaurants a commission based on each order amount. It also charges consumers a delivery fee for orders where the firm handles the delivery. Grubhub has over 50,000 restaurant partners. – Warrior Trading News
