Please ensure Javascript is enabled for purposes of website accessibility

Why Grubhub Stock Slipped 15% Last Month

By Jeremy Bowman – Apr 7, 2020 at 3:39PM

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

Shares of the food delivery specialist fell as the restaurant industry ground to a halt.

What happened

Shares of Grubhub (GRUB) fluctuated last month as investors struggled to determine what kind of effect the coronavirus outbreak would have on its business. Early on, the market seemed to think that it could be a boon as more diners stayed home and ordered takeout, but investors later ran from the stock as the restaurant industry began to implode as it was forced stop eat-in service in response to stay-at-home orders across the country.

As a result, the stock finished the month down 15%, according to data from S&P Global Market Intelligence. The chart below shows how volatile the stock was over the course of the month.

^SPX Chart

^SPX data by YCharts

So what

Grubhub shares actually gained in the first week of March after the company expanded delivery service with Dunkin and got an upgrade from Oppenheimer from underperform to perform, as the research firm predicted that the coronavirus outbreak would provide a tailwind for Grubhub.

A person holding a smartphone with the Grubhub app open.

Image source: Grubhub.

However, the following week the stock crashed as the full force of the pandemic came into focus, with schools closing across the country and businesses telling workers to stay at home, effectively taking away lunch orders in commercial districts. Realizing that the entire restaurant industry was on the verge of a catastrophe, Grubhub said on March 13 that it would suspend fees for independent restaurants, helping to support eateries that can no longer host dine-in customers. By foregoing $100 million in commission fees in the interest of supporting the partners that supply 80% of its orders, Grubhub will rely instead on customers to pay for its service. While orders are likely increasing, revenue may not be as the company gives a break to its partner restaurants. 

Grubhub CEO Matt Maloney followed that up the next week with a letter to the Trump administration calling on it to support the $325 billion aid package proposal from the National Restaurant Association. 

Now what

Grubhub is in a better position than most restaurants since it doesn't need every restaurant to survive in order for its service to grow, but it does share in the crisis facing the industry. The company said on Friday that it would provide more than 100,000 restaurants with a $250 credit, spending $30 million to help them through this difficult time.

Grubhub was already facing challenges with competition and in other areas before the crisis, and these new headwinds will likely remain for several months as the restaurant industry isn't suddenly going to bounce back to full strength. Don't expect any fireworks from this stock.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Dunkin' Brands Group. 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.

*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
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 09/26/2022.

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.