Benchmark Says GrubHub Will Be A Winner In The Food Delivery Space

The food delivery space is big enough for several players and GrubHub Inc GRUB can stand out as "one of the winners," according to Benchmark.

The Analyst

Benchmark's Daniel Kurnos initiated coverage of GrubHub with a Buy rating and $95 price target.

The Thesis

Kurnos said GrubHub's stock, along with some of its rivals, has been "unfairly punished" by the growing competitive landscape in third-party food delivery platforms. In GrubHub's case, the stock has rebounded about 25% from recent lows but is still trading 50% lower from its 52-week highs.

GrubHub holds the title as being the only consistently profitable and self-funded food delivery company in the space, Kurnos said which can be leveraged to drive growth from three catalysts.

• The company can generate 40% or more of total orders from its Grub-managed delivery by the back half of 2021, which would generate "significant" capture rate gains and improving margins.
• The company can benefit from new enterprise level customer wins or partnerships from restaurants that are attracted to GrubHub's unique vertical integration benefits.
• GrubHub should see improving diner retention and quality while at the same time marketing spend will rationalize. This could generate sustainable active diner and daily average grubs (DAGs) growth in the high-teens to low 20% range.

Price Action

Shares of GrubHub were trading around $74.55 Friday morning.

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