Shares of Grubhub (GRUB) drifted 15.6% lower in November, according to data from S&P Global Market Intelligence, extending a more than 30% decline in October caused by underwhelming quarterly guidance from the food ordering specialist.
For perspective, the bulk of Grubhub's declines last month came despite a lack of company-specific news. Rather, with shares still up around 30% year to date at the start of November, Grubhub mostly appeared to fall in lockstep with a broader pullback in high-flying tech names.
That's not to say Grubhub's pullback wasn't entirely merited. Though the company's third-quarter results did exceed expectations -- revenue climbed 52% year over year to $247 million, beating estimates by around $9 million, while earnings of $0.45 per share came in $0.04 above consensus -- its prediction for fourth-quarter EBITDA to fall between 12% and 30% left the market wanting more.
Coupled with Grubhub's healthy year-to-date gains and lofty valuation, it wasn't entirely surprising to see the stock pulling back.
Still, investors should be aware that Grubhub's EBITDA decline is the result of a conscious move by management to sustain its top-line momentum and fend off competitors.
"We have a significant opportunity to accelerate diner growth by broadening delivery coverage areas and increasing marketing spend," explained GrubHub CFO Adam DeWitt. "As a result, we are opportunistically investing an incremental $20 to $30 million in marketing and delivery expansion in the fourth quarter, taking our total 2018 investment in growth to substantially more than $200 million."
As such, I'm not convinced Grubhub's share-price punishment fits its crime. And as soon as its investments in growth begin to yield fruit, I suspect the stock will rebound with a vengeance.