Barclays has raised its investment opinion of Grubhub, positing that a few key moves could significantly change the future outlook of the company, according to a report by Bloomberg.
Shares in Grubhub bounced on the news as Barclays raised its opinion from underweight to overweight.
Analyst Deepak Mathivanan said the “irrational competitive landscape” throughout the food delivery marketplace and Grubhub leaders’ “ill-timed strategic investments, and poor execution” made the stock lose three quarters of its value to reach the lowest point in two years.
Mathivanan urged the company’s board of directors to consider some changes, and upgraded the rating “on the hope of swift execution.”
He asked that Grubhub “reduce investments on unproven areas.” He said there hasn’t been much result from the company’s $100 million in marketing investment over the last year, and that Grubhub’s plans to spend $150 million on “other unproven strategies” won’t help.
“We don’t believe these programs are likely to help achieve sustainable growth in this intense competitive environment,” he said.
Mathivanan added that the company has “meaningful asset value” and he urged preservation of that “before it’s too late.”
“These assets are under intense attack from competition,” he said, adding that the company is a “dominant brand” and that it could be worth “a lot more than current valuation under the right strategy in a rational market.”
Another suggestion is to explore a merger with another leading food delivery company, which could result in “meaningful synergies.” With the right merger, the Barclays analyst said, shares could rise to “well north of $50 per share.”
Mathivanan pointed to the recent takeover of Delivery Hero’s German business by Takeaway.com, noting that Takeaway shares grew by 75 percent since that acquisition, and Delivery Hero shares also climbed 60 percent.
Grubhub shares were up as much as 5.7 percent on Friday (Nov. 15), to $40.69 a share.