In response to weak third-quarter results and downbeat guidance, shares of Grubhub (NYSE:GRUB), a company focused on food delivery, are being mauled today. The stock is down 40% as of 10:37 a.m. EDT on Tuesday.
Here are the headline numbers from the company's third quarter:
- Revenue grew 30% to $322 million. By contrast, analysts were expecting just over $330 million in total revenue.
- GAAP net income was $1 million, or $0.01 per share.
- Non-GAAP EBITDA dropped 10% to $53.8 million.
- Non-GAAP (adjusted) net income was cut in half to $24.7 million, or $0.27 per share. That matched the $0.27 that Wall Street was expecting.
- Active diners grew 29% to 21.2 million.
- Average daily grubs grew 10% to 457,300.
- Gross food sales grew 15% to $1.4 billion.
The mixed third-quarter numbers aren't doing the stock any favors today, but the huge downward move is most likely attributable to guidance for the upcoming quarter:
- Revenue is expected to land between $315 million and $335 million. By contrast, Wall Street was expecting $368 million in total revenue.
- Adjusted EBIDTA is expected to land between $15 million and $25 million, which represents a sharp sequential decline.
Traders are thrashing the stock in response.
This earnings report and management's guidance raise new questions about Grubhub's competitive position. I used to believe that its double-sided network effects with restaurants and diners would give it an almost unbeatable competitive advantage, but that bull thesis seems flat-out wrong. It's likely that food-delivery network effects can be strong in a limited geographic region (such as a city), but those network effects don't appear to apply nationwide. This explains why competitors like DoorDash, Uber Eats, Caviar, and Postmates have been able to carve out market share in some regions (and make Square's decision to sell Caviar to DoorDash earlier this year look like a smart move).
It's possible that Grubhub's stock is a value investment today, but with the competitive landscape in a state of flux, I'm not going to be in a rush to add to my position anytime soon.