Analyst Note| Ali Mogharabi |
Grubhub reported strong third-quarter results as it continued to benefit from increased demand for online food delivery during the pandemic. However, Grubhub must continue to spend heavily on marketing to compete with DoorDash, Postmates, and Uber Eats, with the last two planning to merge by the first quarter of 2021. The firm is being acquired by Just Eat Takeaway.com in an all-stock deal likely to close by the second half of 2021. However, we do not believe that this deal will improve no-moat Grubhub’s competitive positioning in the United States. While we project continued strong demand for online food delivery with the ongoing spread of COVID-19, we are uncertain that the current levels will be sustainable when the economy eventually reopens. We value Grubhub at $77 per share based on the current market price of Just Eat Takeaway.com.