Northland Downgrades GrubHub To Market Perform, Target Cut From $30 To $25 In New Research Note

• Shares of GrubHub Inc GRUB are down 37 percent year-to-date, and are trading around their 52-week low of $22.49.
• Northland Capital’s Jeff Houston downgraded the rating on the company from Outperform to Market Perform, while reducing the price target from $30 to $25.
• Heightened competition and warmer-than-normal weather are expected to have a negative impact on the company’s future performance, Houston stated.

GrubHub is a leading provider of online and mobile takeout food ordering and delivery services. The company’s strength lies in its size and the potential to add chain restaurants to its network, analyst Jeff Houston mentioned.

Competitive initiatives by players such as Uber and Amazon.com, Inc. AMZN and venture capital backed heavy spenders could weigh on GrubHub’s future diner and DAG growth, Houston stated.

Intensifying competition may force GrubHub to make increased investments in enhancing its delivery and marketing infrastructure, which in turn will exert pressure on its profitability, the analyst commented. The company’s adjusted EBITDA margin is expected to decline from 31 percent in 2014 to 28.2 percent in 2015 and to 25.3 percent in 2016.

“We also worry that delivery efforts could prove to be a distraction from executing on core operations,” the Northland Capital report noted.

Houston expects warmer-and drier-than-normal weather in GrubHub’s markets, including NYC, to weigh on the company’s 4Q15 results.