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Investors Are Overestimating The Near-Term Benefit To GrubHub's Earnings From Eat24

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Investors Are Overestimating The Near-Term Benefit To GrubHub's Earnings From Eat24

Citigroup downgraded shares of GrubHub Inc (NYSE: GRUB), as it believes the recent run up in shares is now reflecting the near-term outlook. The firm noted that GrubHub shares have gained 44 percent in the year-to-date period and has added 12 percent or $6 per share since it announced the acquisition of Eat24 from Yelp Inc (NYSE: YELP).

As such, Citi downgraded shares of GrubHub from Buy to Neutral, with a 12-month fair value target at $56 per share. The firm feels at current levels, the company shares do not offer enough upside to warrant a Buy rating.

See also: When Should You Take A Slice Of Domino's Pizza Stock?

Citigroup's Mark May said his analysis suggested that the Eat24 acquisition as well as the smaller pending Foodler and OrderUp acquisitions, is worth only $4 per share to GrubHub's equity.

The analyst believes the investors are overestimating the near-term lift to GrubHub's earnings from Eat24, as he is of the view the integration and related cost synergies could take longer to realize.

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That said, Citi said it remains positive on long-term fundamental outlook of the GrubHub's business.

In pre-market trading, shares of GrubHub were down 2.03 percent at $53.

Latest Ratings for GRUB

DateFirmActionFromTo
Sep 2019MaintainsOutperform
Jul 2019MaintainsOutperform
Jul 2019MaintainsEqual-Weight

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