Grubhub Shares Downgraded By Stifel, Valuation Cited

Stifel believes that GrubHub Inc GRUB provides balanced risk/reward at its current price following a 39 percent surge in the stock after the company reported strong second quarter results. As a result, the firm downgraded the stock from Buy to a Hold. The price target remained at $45.

For the year-to-date period, the stock delivered 76 percent returns whereas S&P 500 returned only 6 percent. The brokerage pointed out that it supported GrubHub's investment thesis when it touched a low range of $18 in late January. Since then, the stock more than doubled and the firm is ready to reassess its rating on fresh catalysts.

"GrubHub is now trading at around 20x 2017E EV / EBITDA, which is similar to the 1-year forward multiples GRUB shares traded at when we initiated coverage with a Buy rating in January 2015 although the company's organic revenue growth was significantly faster at that time (~50% y/y in 4Q:14 vs. ~29% organic y/y growth in 2Q:16)," analysts John Egbert, Scott Devitt and Logan Thomas said in a note.

The brokerage thinks shares could trade range bound in the immediate term citing absence of upward revisions to estimates. Until now, investors appreciated the company's position in the competitive environment.

Third quarter results are expected on October 25.

The stock fell $1.06, or 2.48 percent, to $41.62.