Please ensure Javascript is enabled for purposes of website accessibility

Why Grubhub Stock Lost 13% in July

By Demitri Kalogeropoulos - Updated Aug 5, 2019 at 10:07AM

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

The food delivery specialist is growing quickly, but so are its costs.

What happened

Food delivery specialist Grubhub (GRUB) trailed the market last month, shedding 13% compared to a 1% uptick in the S&P 500, according to S&P Global Market Intelligence. That drop left shares well behind the wider market so far in 2019, down about 10% compared to a 17% rise in the S&P 500.

A customer ordering food on her mobile device.

Image source: Getty Images.

So what

July's slump came following the company's second-quarter earnings report, which paired high growth with spiking costs. Grubhub notched a 36% sales increase as its active diner base passed 20 million users -- up from 15.6 million a year earlier. Yet spiking competition from rivals like Uber Eats and Postmates contributed to weaker profits.

Now what

CEO Matt Maloney and his team expressed confidence that the business will gain efficiency as it grows and as new markets come online. That's a tall order, given the intense focus in this niche by most national restaurant chains and by third-party aggregators like Uber Eats. There appears to be room for many winners in the growing food delivery industry, though, and investors can judge Grubhub's effectiveness here by following its growth rate and its profitability metrics over the coming quarters.

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.

*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 service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

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.