Is GrubHub (GRUB) a takeout target?
According to Barrington Research analyst Jeff Houston, it could be. In a note published today in which he upgraded the online food ordering company to Outperform from Market Perform with a $43 price target, Houston wrote that GrubHub's wide competitive moat and a large and underpenetrated target market makes it an attractive acquisition target.
Earlier this month, Amazon.com (AMZN) rolled out an online food takeout service, which it is test marketing in Seattle. Beyond Amazon, Houston thinks that potential buyers are Uber with its $41 billion private-market valuation, Google (GOOGL), TripAdvisor (TRIP), and Priceline (PCLN).
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Shares of GrubHub rose 1.36% to $36.36 in recent trading.
As Houston writes:
GrubHub enjoys a meaningful first advantage, a tailwind from mobile adoption, a highly profitable business model, pricing power, an innovative management team and board, and significant operating-metric momentum. Plus, given how convenient and compelling its services are to hungry diners, we believe that it will continue to create incremental demand that was non-existent through the traditional alternative, i.e., takeout menus in kitchen drawers.
The company processes about 200,000 restaurant orders a day from about 4.6 million active customers using 300,000 restaurants. Diners search and order for free and the restaurants prepare and deliver the food. GrubHub’s get paid by the restaurant, but only after an order is processed.
GrubHub went public at $26 in April, and it was an initial success, soaring 31% on its debut. Yet since hitting a high of almost $46 in August, the stock has drifted down.
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