GrubHub Shares Rally Following Cowen Upgrade

Grubhub Inc GRUB shares shot up during Wednesday after Cowen analyst Thomas Champion upgraded the stock to Outperform with a $54 price target. He sees Grubhub’s growth profile and leadership as underappreciated.

“We forecast 22% annual revenue growth and 28% EBITDA growth for GRUB 2017-22. Our forecast is bolstered by a new Delivery Industry model and encouraging data from our Proprietary Consumer Delivery Survey,” the analyst wrote in a note.

Online Delivery Should Help Spur Growth

Champion sees this sector of the business growing from $20 billion to $55 billion.

“With Online approaching 50% of total market dollars, our forecast calls for an improving US Delivery market and accelerating growth through the forecast period. All in, we forecast Delivery to grow from $43BN in 2017 to $76BN in 2022, 12% annually over the next five years,” he said.

As the industry continues to get grow, Champions feel Grubhub is in a strong position to continue to see solid transaction growth numbers. He also noted that even he views his current model as having conservative estimates.

Strong Survey Results

Cowen's consumer usage survey suggested that 34 percent of Online Delivery customers use Grubhub, which is about 70 percent ahead of Grubhub’s next competitor.

“Other providers include UberEats at 20%, followed by Eat24/Yelp Inc. YELP 17%, Delivery.com 16%, and Amazon.com, Inc. AMZN at 11%. Given Grubhub's usage advantage, we find competitive fears overstated,” Champion wrote.

Grubhub shares were trading up over 5 percent at $45.88. The company reports earnings on July 27.

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