Grubhub Is Credit Suisse's Favorite 'Trump Trade'
Paul Bieber of Credit Suisse named GrubHub Inc (NYSE: GRUB), the leading online food delivery company, as his "favorite Trump trade" — that is, a top investment idea likely to benefit from President-elect Donald Trump's presidency.
Bieber also initiated coverage of Grubhub with an Outperform rating and $48 price target.
According to Bieber, Grubhub is well positioned to take advantage of the large secular shift toward the online food ordering market for six main reasons:
- The market is very large with a currently low penetration rate of less than 5 percent.
- The market itself is very attractive with high incremental margins given Grubhub's healthy unit economics with low incremental expenses other than credit card feels and delivery expenses.
- The market is appealing given the increasing marketplace take rates (commissions), which serve as a sign the market is currently undermonetized and restaurant owners are willing to pay higher prices to drive incremental order volume.
- Grubhub could see a modest margin expansion in 2017 after its investments in the business hurt margin expansions in 2015 and slowed the margin expansion in 2016.
- Grubhub continues to make investments in delivery and expand its overall market opportunity.
- Earnings per share could gain on a potential lower corporate tax rate versus the company's current rate of around 40 percent.
At last check, shares of Grubhub were up 1.57 percent at $37.41.
Latest Ratings for GRUB
|Jan 2017||Morgan Stanley||Upgrades||Equal-Weight||Overweight|
|Jan 2017||Credit Suisse||Initiates Coverage On||Outperform|
|Jan 2017||Monness Crespi Hardt||Downgrades||Neutral||Sell|
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