Oppenheimer Upgrades GrubHub, Sees Biggest Threat Towards Food Ordering As An Opportunity

Jason Helfstein of Oppenheimer upgraded GrubHub Inc GRUB from Perform to Outperform with a newly established $42 price target.

According to a survey conducted by Helfstein, consumers have made it clear they prefer to order food directly from a restaurant so they can pose questions on the menu to make a better choice. However, the analyst believes this isn't a problem for GrubHub as there are two ways to alleviate this issue:

• GrubHub could implement a chat function inside of its food ordering platform so that consumers can still have the much needed interaction with restaurants in real time.
• The company's app could expand to include a sizable number of food pictures so that restaurant choices are made clearer to consumers.

Pace Of Competition

Helfstein noted that venture funding for private companies looking to compete with GrubHub has declined in 2016 versus 2015.

This means GrubHub's already existing competitors are maturing and capital available for new companies is decreasing. In addition, this may signal that GrubHub's competitors are cash-strapped and won't be looking to "burn exorbitant amounts" of capital by enticing consumers with free food promotions.

Expansion Out Of Major Cities

Also playing a factor in the analyst's upgrade is the fact that GrubHub has a clearer path towards dominating smaller markets where large rivals like UberEATS isn't focusing on.

Specifically, UberEATS' international focus implies it will only operate in the largest cities, which makes it a lot easier for GrubHub to win over tier two and three cities that are vital for the company's profitability.

See also:

For Grubhub, The UK Could Be A More Attractive Market Than The US

Grubhub Setting The Table For Earnings Growth In 2017