What happened

Shares of Grubhub (NYSE:GRUB) were up by double digits last month as the stock caught a tailwind from broader gains in the market and investors struggled to assess the impact of the coronavirus pandemic on the food delivery specialist. As became clear over the course of the month, there were both positive and negative effects on its business from the pandemic.

The stock finished the month up 17%, according to data from S&P Global Market Intelligence, though it whipsawed for much of April, as the chart below shows.

^SPX Chart

^SPX data by YCharts.

So what

After a brief dive to start the quarter, Grubhub shares roared higher along with the broader market. Congress and the Federal Reserve took steps to shore up the economy, and coronavirus cases around the world were peaking. The company also benefited from signs that more restaurant companies, including Dunkin' Brands Group, were turning to it for delivery. 

A man holding a smartphone with the Grubhub app open

The Grubhub app. Image source: Grubhub.

But Grubhub threw cold water on the rally on April 13, when the stock fell 12% after the company offered investors an update. Management said it expected results to be slightly above the midpoint of its earlier guidance for revenue of $350 million to $370 million and adjusted EBITDA of $15 million to $25 million.

 It added that performance was trending above or at the high end of its guidance for the first 10 weeks, but the pandemic led to a swift change starting in mid-March. As a result of that impact, daily average orders were just flat in the quarter. Orders began to recover in April, but it withdrew its guidance as it plans to invest much of its second-quarter profits into helping its restaurant partners. 

In the last week of April, the stock gained as a number of restaurants reported off-premise sales continuing to improve in April, a positive sign for Grubhub.

Now what

Grubhub is set to report earnings after hours on Wednesday, May 6. Analysts expect revenue to grow 10.3% to $357.2 million, with a loss of $0.04 per share, down from a profit of $0.30 per share in the year-ago quarter. There are larger questions facing Grubhub about what the restaurant industry will look like in the aftermath of the pandemic, as a large number of independent operators are expected to close. Restaurants and local jurisdictions have also begun pushing back on delivery fees from third-party providers like Grubhub, adding more uncertainty to the equation.

While food delivery may be in high demand these days, Grubhub still faces significant challenges during the pandemic. Look for some insight from management when its earnings report comes out.