Analyst Note| Ali Mogharabi |
Grubhub reported strong first-quarter revenue growth as it continued to benefit from increased demand for online food delivery during the pandemic. However, the firm must continue to spend heavily on marketing to compete with DoorDash and UberEats. Grubhub is being acquired by Just Eat Takeway.com in an all-stock deal likely to close in June of this year, making this the last quarter in which Grubhub will report as a standalone company. We do not believe this deal will improve no-moat Grubhub’s competitive positioning in the U.S. While we project strong demand for online food delivery, we are uncertain that the current levels will be sustainable given the continuing increase in vaccinations and overall economic recovery in the U.S., both of which likely will increase demand for dine-in service. We value Grubhub at $71per share based on the current market price of Just Eat Takeaway.com.