GrubHub (GRUB) Stock’s Worst-Ever Trading Day to Happen Again as Its Market Share Erodes

Kiril Nikolaev @kirilnikk123
October 30, 2019 16:00 UTC
  • GrubHub recorded its worst trading day on Tuesday as it nosedived by 45%.
  • The company is losing ground to competitors like DoorDash and Uber Eats.
  • Company executives appears to have no solution to stop the bleeding.

To say that GrubHub has failed to deliver would be an understatement. The company’s stock plummeted 45% on Tuesday as the food delivery company missed revenue estimates and lowered its guidance for the rest of the year. The drop marks GrubHub’s worst trading day in history and it’s likely to happen again.

According to CNBC, GrubHub posted third-quarter revenue of $322 million, which is significantly lower than consensus estimates of $330.5 million. In addition, the company told investors that it expects to print revenue between $313 million and $335 million in the fourth quarter – at least 15% lower than the forecast.

To investors, the third-quarter earnings report offers signs of a company slowly bleeding to death. This is supported by the fact that competitors such as DoorDash and Uber Eats are eating up GrubHub’s market share. In addition, company executives are clueless on how to reclaim their dominance in the food delivery space. Those are the ingredients for a broken stock.

DoorDash and Uber Eats Are Taking Over Food Deliveries

Although the meal delivery industry is a crowded space, it’s growing as more Americans prefer to eat restaurant food at home. According to Second Measure, sales for the food delivery industry grew by 40% year-over-year. Unfortunately for GrubHub, they are not maturing fast enough to capture a significant part of the industry’s growth.

The Second Measure report revealed that the company’s monthly share of U.S. food delivery sales has been in a strong downtrend since December 2018. In April, DoorDash surpassed GrubHub and became the king of food delivery services.

GrubHub’s market share has been plummeting and there’s no recovery in sight. | Source: Quartz

In a more recent report, Second Measure revealed that GrubHub earned 30% share of September sales. On the other hand, DoorDash grabbed 34% of the market share in the same month. The same report also noted how DoorDash rose above its competitors. The company experienced an astounding 114% year-over-year growth as of September.

September sales of food delivery service providers. | Source: Second Measure

In addition, Uber Eats has been growing at a rapid rate. In the second-quarter of this year, the monthly active platform consumers (MAPCs) of Uber Eats jumped by more than 140% year-over-year. More importantly, revenue increased 72% from $346 million in the same quarter last year to $595 million.

GrubHub CEO Offers Very Little Clarity on How to Stave Off the Competition

Savvy investors were most likely dismayed by Matt Maloney’s recent note to shareholders. The GrubHub chief executive said,

We will be moving quickly, spending more and trying many different strategies over the next 12-18 months to increase restaurant supply aggressively while making our diner experience more sticky.

If you read between the lines, it tells you that they don’t have a clear strategy on how to regain their throne.

This is bad news for investors, especially at a time when DoorDash has successfully raised $600 million to boost its valuation to $12.6 billion. Private equity is backing a new horse while public investors are abandoning the dethroned king. At the rate that GrubHub is losing market share, we won’t be surprised to see shares tumble and revisit lows at $18.00. That’s another 45% drop from current levels.

Disclaimer: The above should not be considered trading advice from CCN. The write does not own GrubHub stock.

This article was edited by Sam Bourgi.

Last modified: October 30, 2019 14:43 UTC

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Kiril Nikolaev @kirilnikk123

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has a bachelor's degree with a specialty in finance and lives in Canada. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. He owns Bitcoin, Ethereum, and other cryptocurrencies. He holds investment positions in the coins but does not engage in short-term or day-trading. Follow the author on Twitter @kirilnikk kirilnikk123@gmail.com