Analyst Note
| Ali Mogharabi |Grubhub reported strong second-quarter results as it benefited from increased demand for online food delivery, continuing the positive trend seen at the end of the first quarter. The second quarter reflected the full impact of COVID-19, and the firm experienced a surge in consumer demand as well as an increase in partnered restaurants. 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. Grubhub is being acquired by Just Eat Takeaway.com in an all-stock deal also likely to close early next year. However, we do not believe that this deal will improve no-moat Grubhub’s competitive positioning in the United States. While we project strong demand for online food delivery with the ongoing presence of COVID-19, there is uncertainty that it will be sustainable at current levels when the economy eventually recovers and restaurants reopen. We now value Grubhub at $61 per share based on the current market price of Just Eat Takeaway.com.