Monness Crespi Hardt: GrubHub Shares 'Not Cheap,' But a Buy

Monness, Crespi, Hardt & Co. initiated coverage on GrubHub Inc GRUB with a Buy and a $42 price target. The analysts see GrubHub as an early player in the $50 billion food delivery and takeout market. GrubHub, with $2.3 billion in revenue, has just 5 percent penetration, providing “substantial runway for future growth.”

Monness, Crespi, Hardt are not as optimistic on the size of the market as GrubHub’s own estimates, but the analysts see the opportunity to be “substantial,” nonetheless.

On valuation, the research firm said  that they recognize that GrubHub shares are not cheap at 19.1x 2016 expected EBITDA and 6.4x 2016 expected revenue. However, the analysts expect GrubHub to have positive momentum as a result of its position as a market leader, size and the potential for upward revisions to earnings and revenue estimates.

That should translate to further gains for the stock. Monness, Crespi, Hardt's $42 price target is a 22 percent premium on Friday’s closing price of $34.43.