Barclays on Friday initiated coverage of GrubHub Inc (NYSE: GRUB) with an Overweight rating and a $46 price target – 16 percent above Thursday's closing price of $39.69.
The analysts said that GrubHub is still in its “early days” of gaining market share, with just 3 percent penetration of the total delivery market in the U.S. market. Barclays noted that it expects delivery options to increasingly move online as it is both more convenient and generates better ROI for the merchants.
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Barclays also said that valuations of GrubHub, which is priced at 29x 2015 EBITDA, underestimate the likelihood of positive revisions as the company gains steam nationwide.
Barclays priced GrubHub at $46 based on a 34x multiple on 2015 EBITDA, a valuation that it noted was “in line with its high-growth internet peers at 36x.”