UPDATE: Brean Capital Upgrades GrubHub As Delivery Adds To Great Story

In a report published Friday, Brean Capital analyst Tom Forte upgraded the rating on GrubHub Inc GRUB from Hold to Buy, and named a $45.00 price target. In the report, Brean Capital noted, "GrubHub operates the largest online restaurant ordering service in the US, with roughly 33,000 restaurants and 5.03MM consumers (in 4Q14). Through its efforts with consumers and restaurants, GrubHub has created a network effect. We appreciate the company's performance-based business model where it only gets paid when a consumer actually places an order. While the company's 4Q14 operating results and 1Q15 and full-year 2015 guidance were very impressive, the most significant announcement was GrubHub's acquisitions to advance its first-party delivery efforts. We believe this addresses the most significant bear case on the name, based on our conversations with investors, and should enable the company to expand its total addressable market of restaurant partners and increase its long-term take rates. "However, we anticipate it will be slightly dilutive to long-term adjusted EBITDA margins, and we are lowering our forecast to 38.0% from 40.0%. On the significance of this refinement to GrubHub's strategy, we are upgrading our rating to Buy from Hold and introducing our 12-month target price of $45. This target price is based on our discounted cash flow analysis that assumes GrubHub is able to achieve long-term adjusted EBITDA margins of 38.0%, compared with 31.0% in 2014." GrubHub closed on Thursday at $39.76.