Will GrubHub Continue To Outperform? JMP Thinks So

April 30, 2015

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In a report published Thursday, JMP Securities analysts maintained a Market Outperform rating on GrubHub Inc (NYSE: GRUB), with a price target of $55, after the company reported robust 1Q05 results.

GrubHub reported better-than-expected 1Q results with revenues at $88.3 million and EBITDA at $28.2 million. The company reported a 5.2 percent y/y increase in its average order size at $27.93 during the quarter.

“Delivery Services added some to Order Size growth, but we also believe that strength is from adoption across Tier 2 and Tier 3 markets,” the report mentioned.

The company’s shares have, however, traded down 10 percent due to “relatively in-line guidance, increased investments around Delivery, threat of competition, and profit taking given shares are up ~25% since reporting 4Q results on Feb. 4,” the analysts wrote.

The company has raised its 2015 revenue guidance by $3.5 million at the mid-point while keeping its EBITDA guidance unchanged as it invests in delivery and enhances advertising in 2H. The analysts consider the company’s guidance as conservative.

In the report JMP Securities noted, “…the incremental $10 million investment in Delivery is GrubHub playing offense and is likely to be offset by revenue; we believe GrubHub should be investing in delivery, given what we view as differentiated delivery assets, and we are not concerned about competition here.”

GrubHub continues to be a leader in the $70 billion food takeout and delivery market online due to its two-sided network across its 35,000 restaurants.