As earnings season winds on, might Grubhub prove tasty for investors, with earnings a springboard for outsized gains moving ahead?
As Barron’s reports, citing research from Credit Suisse, shares in the online meal delivery firm could rise as much as 60 percent through the next year, based on fundamentals extending beyond an early February fourth-quarter report.
The projection was made amid a larger report that focused on internet stocks, with analysis of 20 companies. The 60 percent gain noted by the sell-side research is among the firms with the biggest upside potential within that group, which also includes furniture retailer Wayfair and travel companies such as Expedia.
The research, via Credit Suisse Analyst Stephen Ju, states that pullbacks represent buying opportunities. The analyst upgraded Grubhub to outperform from neutral, with a price target now at $130, compared to Tuesday intraday trading of $76.68, with upside of more than 69 percent.
As has been reported, the firm has a partnership in place with Yum! Brands (which now has a 3 percent stake in Grubhub), and has been expanding its market share in the United States, notching presence in more than 100 new markets last year.
“This is not a stock call around the fourth quarter of 2018,” wrote Ju, “but rather increased comfort around return on invested capital on recent initiatives, which we believe are accretive, opportunistic and conducted from a position of strength. And we would use any potential pullback to either increase or initiate a position on Grubhub shares.”
Though the Credit Suisse analyst has stated that the upside in Grubhub is not predicated on fourth-quarter results, it should be noted that the analyst has estimates for the quarter that are ahead of consensus, and where Barron’s notes he has earnings of 26 cents, two pennies above the Street, and sales of more than $294 million compared with the consensus of $293 million.
The food delivery space, as PYMNTS has reported, has been seeing some shakeout, as Munchery this month shuttered operations, and where even though smaller players have entered the market, Grubhub still maintains a market-leading position. In addition, the PYMNTS Restaurant Readiness Index has found that roughly 86 percent of customers view ordering through third-party apps favorably, while roughly 54 percent of quick service restaurant (QSR) managers hold the same sanguine view.