Cramer Blasts GrubHub Analysts, Questions If Anyone Was 'Paying Any Attention At All'

Online food delivery company GrubHub Inc GRUB enjoyed a few years of operating without competition, but its third-quarter report made clear that this is no longer the case, according to CNBC's Jim Cramer.

What Happened

GrubHub reported last week with third-quarter results that sent the stock tumbling by more than 40% from a combination of weak orders and concerning guidance.

Many Street analysts were caught off guard, and it resulted in "downright comical" price target reductions, Cramer said on Friday's "Mad Money."

For example, Mizuho analysts slashed their price target from $100 to $35, which suggested the firm "loved this stock in the 50s" and overnight "hate it in the 30s," Cramer said.

By Wednesday a total of 12 Street analysts had issued downgrades, he said. 

Street analysts are guilty of a combination of placing too much trust in GrubHub's management and failing to understand the market, in the CNBC host's view. 

"The most common refrain here is that the industry's much more competitive than they'd been led to believe. It's like they'd never used these online delivery services," Cramer said.

"Anyone who'd been paying any attention at all could tell this was coming."

Why It's Important

One GrubHub observer who was unsurprised: Cramer himself.

As a co-owner of two restaurants, Cramer said he recognized the ultra-competitive environment marked by rivals offering "great deals."

Signs of GrubHub's struggle were just as apparent on its own platform, he said. 

"You only had to use their services and believe your own eyes." 

What's Next

One important takeaway for investors moving forward is to never underestimate the power of firsthand observations, Cramer said. 

"Sometimes what you see in your day-to-day life, what your eyes see, is far more helpful than what you hear from the analysts on Wall Street."

GrubHub shares were trading 3.47% higher at $34.89 at the time of publication. 

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Photo courtesy of GrubHub.