Bear of the Day: Grubhub (GRUB)

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Grubhub ( GRUB ) provides online and mobile ordering platforms to enable diners to order directly from more than 50,000 takeout restaurants in over 1,100 US cities and London. They are headquartered in Chicago and also have offices in New York and London.

In late 2013, Grubhub and Seamless merged and their current portfolio portfolio of brands includes Grubhub, Seamless, MenuPages, Allmenus, LAbite, Restaurants on the Run, DiningIn and Delivered Dish. The company IPO'd in 2014.

They currently process more than 290,000 daily orders and serve approximately 8.2 million active diners.

Results Disappoint

The company reported disappointing Q4 results. Their adjusted earnings of 19 cents per share missed the Zacks Consensus Estimate of 20 cents per share.

"Building out more restaurants to order from is where we are looking to grow in 2017," said the CEO , adding that the company's penetration rate remains "dramatically below" 10% in core markets such as Chicago and New York City.

Shares plunged after the report.

For the current year, the management expects revenues in the range of $620 million to $660 million and adjusted EBITDA in the range of $165 million to $190 million.

Falling Estimates

Analysts have slashed their estimates for the company after disappointing results. Zacks Consensus Estimates for the current and the next fiscal year have plunged to $0.90 per share and $1.12 per share respectively, from $0.96 and $1.21, 7 days ago. Declining estimates sent the stock to a Zacks Rank #5 (Strong Sell).

The following chart shows negative price and earnings momentum:

GrubHub Inc. Price and Consensus

GrubHub Inc. Price and Consensus | GrubHub Inc. Quote

The Bottom-Line

Competition in the online food ordering space is heating up, particularly with the entry of some heavyweights like Uber Eats and Amazon Restaurants. Grubhub will have to spend more on its platform and promotions to counter rising competition.

Trading at a forward P/E multiple of 40.95, the stock looks expensive given concerns about its profitability now. The stock has a VGM Score of "F' currently.

More Stocks to Sell. Now.

Beyond our Bear Stock of the Day, today's list of 220 Zacks Rank #5 Strong Sells demand even more urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. Many appear to be sound investments but, since 1988, such stocks have actually performed more than 11X worse than the S&P 500.

See today's Zacks ""Strong Sells"" absolutely free >>.

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GrubHub Inc. (GRUB): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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