GrubHub Lost Its Appetite

GrubHub Lost Its Appetite
December 28 04:41 2018

GrubHub (NYSE:GRUB) is the world’s leading online and mobile food ordering company, currently partnering with over 80,000 restaurants in 1,600 U.S. cities. Despite competition from the likes of Uber, DoorDash, Postmates, Square and Amazon, GrubHub still controls 34%% of the U.S. food delivery market.

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Grubhub was a first to market mover and shares of Grubhub returned 5X from 2016 to 2018 and in 2018 even went as high as $140, but shares are down some 49% in the fourth quarter, and nearly flat for 2018.

The decline down started in October along with the entire equity markets.  However, shares went down another 15% in November after Grubhub announced their third-quarter results that beat expectations, but said their fourth-quarter EBITDA was going to fall between 12% and 30%, which was an excuse to sell the lofty valuation stock,

Grubhub, no longer has its first to mover competitive edge.  In order to stay ahead of the competition, Grubhub will have to continue to grow in other cities and their marketing expense are going to have to grow as well, which will increase their customer acquisition costs.  This is probably why they lowered their EBITDA projections for the fourth quarter.

With the U.S. online food delivery market is still expected growth from $17 billion this year to $29.3 billion in 2022

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and with Grubhub’s P/E down to 50 from 80 in recent months, is now the time to buy Grubhub, lets go to the charts to find out?

On the monthly chart it’s evident of Grubhub’s recent declines as it broke through the monthly up trend line in October.

At this time, the chart suggests the momentum is still to the downside. Levels of interest for price to pause or reverse are the weekly demand at $61 and/or $44.

However, if price does rise from the current level, the first test will be the daily supply at $86. If this level is breached, price has a shot of climbing back to $100.

Nevertheless, right now price is sandwiched between two levels that don’t offer a good reward to risk trade. As a result, wait for the price action to continue to develop to give a better indication of where price is headed next.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

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About Article Author

rollandthomas
rollandthomas

I'm a retail investor like most of you and learning everyday, but I have been educated and trained to identified the Smart Money on the charts to pick up whatever crumbs they leave behind.

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