Market Overview

KeyBanc Cuts GrubHub Estimates, Says Food Delivery Service Losing Share Of Diner Spending

Share:
KeyBanc Cuts GrubHub Estimates, Says Food Delivery Service Losing Share Of Diner Spending

GrubHub Inc (NYSE: GRUB) seems to be losing share of spending among diners it acquired, which suggests an increase in slaes and marketing expenses, according to KeyBanc Capital Markets.

The Analyst

Andy Hargreaves maintained a Sector Weight rating on GrubHub. 

The Thesis

A retention analysis based on KBCM First Look Data indicates a decline in spending by diners that GrubHub acquired, which suggests that marketing expenses should be projected against order volume rather than diner growth, Hargreaves said in a Sunday note. (See his track record here.) 

The analysis showed that the portion of total online food delivery budget spent on GrubHub among diners acquired by the company in the back half of 2017 fell from 84 percent in January 2018 to 57 percent in April 2019, the analyst said. 

Total spending by GrubHub-acquired diners declined 60 percent between January 2018 and April 2019, according to KeyBanc. 

The sell-side firm lifted its sales and marketing estimates to incorporate these trends, and Hargreaves said the higher estimates result in a decline in KeyBan's adjusted EBITDA estimates for 2019 and 2020, from $249 million to $245 million and from $343 million to $311 million, respectively.

“GrubHub operates as a top player in a fast-growing market, but faces challenges from a mix-shift to delivery and stiff competition that are likely to limit profit dollar growth for the foreseeable future," he said. 

Price Action

GrubHub shares were up 0.84 percent at $65.72 at the time of publication Monday. 

Related Links:

Uber Shares Rise, Analysts Largely Positive After First Quarterly Print

Notable Insider Buys This Past Week: ADM, Biogen, Grubhub and More

Photo courtesy of GrubHub. 

Latest Ratings for GRUB

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

View More Analyst Ratings for GRUB
View the Latest Analyst Ratings

Posted-In: Andy Hargreaves KeyBanc Capital MarketsAnalyst Color Reiteration Restaurants Analyst Ratings General Best of Benzinga

 

Related Articles (GRUB)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
PFSWB. RileyReinstates4.5
RMBSWells FargoMaintains16.0
PSTGWells FargoMaintains25.0
SUIWells FargoMaintains137.0
ELSWells FargoMaintains120.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

Vertical Companies Acquires UMBRLA Holding Company, Intends to Position Itself As Major Cannabis MSO

30 Stocks Moving In Monday's Mid-Day Session