Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of GrubHub (NYSE:GRUB) sank on Wednesday after the company reported mixed first-quarter earnings. At 2:30 Wednesday afternoon, the stock was down 9.5% from the previous close.
So what: GrubHub reported robust year-over-year revenue growth of 50.5%, with its $88.2 million of quarterly revenue beating analyst estimates by about $3 million. Active diners rose 46% year-over-year, and gross food sales jumped 36%.
EPS doubled year-over-year, coming in at $0.12, but analysts were expecting EPS of $0.14. Guidance for the second quarter calls for revenue between $83.5 million and $85.5 million, with full-year revenue expected to be between $346 million and $361 million.
Now what: The decline in the stock price seems solely due to the company's earnings miss, but analysts may have simply been overly optimistic. GrubHub's operating margin jumped from 14% during the first quarter of 2014 to nearly 21% during the first quarter of 2015, with operating income rising by 125% year-over-year, far faster than revenue.
The drop in GrubHub's stock price seems like a major overreaction. There's almost nothing bad to say about GrubHub's quarter, except that earnings missed analyst estimates.
Timothy Green has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.