Please ensure Javascript is enabled for purposes of website accessibility

Why GrubHub Stock Popped 7% on Wednesday

By Rich Smith – May 1, 2019 at 4:31PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Lots of buying going on at GrubHub today -- but you'll never guess who was doing the buying!

What happened

Shares of online takeout-food facilitator GrubHub (GRUB) shot up 10% in early trading Wednesday before retracting to close the day up a still respectable 6.9%. Clearly, someone was interested in buying the stock -- but the real surprise is who.

According to separate reports, GrubHub CEO Matthew Maloney bought $1 million worth of GrubHub stock on Tuesday, paying $64.87 on average to acquire some 15,416 shares of the company. And second, in the course of reporting its own earnings, Yum! Brands (YUM -1.35%) revealed that it, too, had acquired "an interest in GrubHub common stock" (of an unspecified amount).

Glowing exclamation point and question mark

Image source: Getty Images.

So what

GrubHub stock has lost 30% of its value over the past year. This cheaper price tag on the company's stock might suffice to explain both the purchases by the CEO and Yum. Of the two, however, I suspect investors are reacting more strongly to Yum's interest in the company. (After all, a CEO is kind of expected to like his own company's stock).

Investors may be betting that once Yum has whetted its appetite with an initial stake in the company, it will later go whole hog and buy the rest of GrubHub.

Now what

I don't know if that will happen or if Yum is even contemplating such a transaction. Even if it isn't, though, Yum management had a lot of nice things to say about GrubHub today, such as "we are excited about our partnership with GrubHub and the opportunity to leverage the GrubHub marketplace" and "our partnership with GrubHub has allowed for real-time feedback ... to continue to elevate the customer experience to even higher levels."

Yum CEO Greg Creed also mentioned that "over 200 locations" of the company's restaurants are now "on the GrubHub marketplace," which indicates strong support for GrubHub's business model and a potential tailwind to its revenues. Any way you slice it, this is good news for GrubHub.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Grubhub. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

GrubHub Inc. Stock Quote
GrubHub Inc.
GRUB
Yum! Brands, Inc. Stock Quote
Yum! Brands, Inc.
YUM
$109.16 (-1.35%) $-1.49

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.