GrubHub (GRUB) Losses To Pare Down in '16 - Susquehana

Susquehana analyst, Shyam Patil, has been cautious on shares of GrubHub Inc. (NYSE: GRUB) and with good reason but he raised his price target to $24 from $19 after revenue was at the high end of guidance and losses look to pare down over the coming year. He still maintains his Neutral rating due to slowing growth, concerns over margin pressure and the back end guide.

Revenue of $99.6m (36% y/y or 27% y/y organic) was at the high end of the previous guidance range ($98-$100m) and inline with the preannouncement and our/consensus estimates. EBITDA beat us by 5% and consensus by 10% as opex came in 2% lower vs. us; consequently, EPS beat us by 25% and consensus by 35%.

Guidance came in ahead of consensus but was more back end loaded. 1Q revenue guide at the mid-point was in-line with consensus but EBITDA was ~10% above consensus. 2016 revenue guide at the mid-point was ahead of consensus by 1% and EBITDA was ahead of consensus by 1%.

Losses are expected to pare down by 4Q16. Grub is rapidly expanding its delivery capabilities. The company increased its delivery volume from close to 0 in early 2015 to a ~$200m run-rate in GFS across ~50 markets by 4Q15, though it was helped by a few acquisitions. The company invested ~$5.5m in delivery in 4Q (vs. previous guide of $5-$7m) and continues to expect investment of ~$10-$20m in 2016, but losses are expected to reach close to break even by 4Q16.

For an analyst ratings summary and ratings history on GrubHub Inc. click here. For more ratings news on GrubHub Inc. click here.

Shares of GrubHub Inc. closed at $21.53 yesterday.

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