GrubHub Sees Record Drop as Web Food-Delivery Market Crowds

  • Shares plunge 24 percent, the most since April 2014 IPO
  • Third-quarter earnings, revenue forecast trail predictions

GrubHub Inc. plunged the most since going public in April 2014 after its quarterly earnings and revenue forecast fell short of analysts’ estimates amid growing competition in Web-based food delivery.

The Chicago-based company, which works with about 35,000 restaurants in more than 900 U.S. cities, is facing challengers like Postmates Inc., and Yelp Inc. In 2013, the company acquired its biggest competitor, Seamless, and earlier this year bought Restaurants on the Run and DiningIn. Competition will increase as Uber Technologies Inc. and Inc. expand into the food-delivery market.

Grubhub’s shares plummeted 24 percent to $24.49 at the close in New York, putting the stock down 33 percent this year.

Blake Harper, an analyst at Topeka Capital Markets Inc., said the decline was a result of GrubHub putting more money in its delivery business. Investors are questioning whether they will get a payback on that investment, he added.

“They have to invest, but it’s not just to survive,” Harper said. “They do have a good chance to accelerate their growth in the second half of the year.”

The company posted earnings per share of 13 cents for the third quarter, excluding some items, while analysts anticipated 14 cents on average. Revenue of $85.7 million, a 38 percent jump from a year earlier, missed predictions by $1 million. The company expects fourth-quarter revenue to range from $98 million to $100 million, short of analysts’ $101.2 million estimate.

The fast-growing company has seen a slowdown in sales this year. Analysts predict a 29 percent revenue increase in 2016, following a 43 percent gain in 2015.

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