Please ensure Javascript is enabled for purposes of website accessibility

Why Grubhub Stock Was Up 17% Last Month

By Jeremy Bowman – Updated May 5, 2020 at 5:51PM

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 restaurant delivery specialist gained on a recovery from the depths of the coronavirus crisis.

What happened

Shares of Grubhub (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.

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 Stock Quote
Grubhub
GRUB
Dunkin Brands Group Stock Quote
Dunkin Brands Group
DNKN

*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
342%
 
S&P 500 Returns
110%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/05/2022.

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.