GRUB - Grub Hub - Company Profile
GrubHub Inc., together with its subsidiaries, provides an online and mobile platform for restaurant pick-up and delivery orders in the United States. The company connects approximately 44,000 local restaurants with diners in approximately 1,000 cities. It operates GrubHub and Seamless Websites through grubhub.com and seamless.com. The company also offers GrubHub and Seamless mobile applications and mobile Websites for iPhone, iPad, Android, iWatch, and Apple TV devices; and Seamless Corporate program that helps businesses address inefficiencies in food ordering and associated billing. In addition, it provides Allmenus.com and MenuPages, which provide an aggregated database of approximately 380,000 menus from restaurants in 50 states.
GrubHub is a concept that is catching fire and the bigger they get the more restaurants want to sign on to the service. They now serve 44,000 restaurants. They do not markup prices. Whatever the restaurant charges is what you pay. Diners can customize any order to their own taste specifications and dietary needs.
Restaurants benefit because the service drives more orders. Many people cannot take 2 hours out of their day to go to the restaurant to eat. GrubHub brings the restaurant to them. Restaurants typically see about 30% more takeout orders during their first year when they sign up for the Grubhub service. Delivery fees range from free to $3.99.
GrubHub currently has more than 6.9 million diners. Ordering through the GrubHub online menu is 50% faster than ordering from the restaurant on the phone.
The company recently announced participation with national chain restaurants including Boston Market, Johnny Rocket's, California Pizza Kitchen, Veggie Grill, On the Border and Panda Express. This is a natural for fast food chains. They prepare the food fast and it gets to the diner fast.
An analyst at Moness Crespi Hardt just upgraded them to buy from neutral saying the fundamentals are rapidly improving with the addition of the chain restaurants. Secondly they completely overhauled their tech platform in 2015 and the benefits are rising quickly. They are also integrating POS features including Apple Pay. He also believes they are a potential acquisition target by companies like Amazon, Uber and Postmates. His biggest point is the addition of the chain restaurants. Adding companies with hundreds or even thousands of restaurants will catapult them to the next level.
Earnings August 2nd.
Shares have been rising and they closed at an 11-month high on Thursday. In Friday's market crash they gave back only 1.4%, which is nothing compared to the rest of the market. This strong relative strength shows that current owners do not want to sell.
Buy Jan $32.50 call, currently $3.80, no initial stop loss.
FEYE - FireEye - Company Profile
FireEye provides cyber security solutions for detecting, preventing, analyzing, and resolving cyber-attacks. The company offers vector-specific appliance solutions that provide threat protection from network to endpoint for inbound and outbound network traffic that may contain sensitive information. It also offers Central Management System that provides cross-enterprise threat data correlation to identify and block attacks across multiple attack vectors; and Threat Analytics Platform to identify and respond to cyber threats by correlating enterprise-generated security event data from any security product with real-time threat intelligence, as well as Malware Analysis System to manually execute and inspect advanced malware, zero-day, and other advanced cyber-attacks embedded in files, email attachments, and Web objects. In addition, the company offers Network Forensics Platform that helps in detecting threats and view specific packets and sessions before, during, and after the attack to confirm what may have triggered a malware download or callback; Investigation Analysis System, a centralized analytical interface to the Network Forensics Platform; and Mandiant Intelligent Response that enables remote investigation of endpoints and allows security teams to collect targeted forensic data to identify attacker behavior, tools, and techniques.
FireEye disclosed last week that it had hired Morgan Stanley to evaluate multiple acquisition offers. One of the suitors was Symantec but they could not agree on a price. Bloomberg said the company was looking for something in the $30 range as a fair offer. Shares are currently trading at $16. The other potential acquirer was not named. All talks have ended but once for sale, always for sale. Now that other companies know the price FireEye was willing to accept it may trigger action by other potential acquirers.
FireEye is unique because they can actually track cyber attacks, tell the client what data the hackers were trying to get or did acquire and who the hackers were.
Two weeks ago they discovered a new type of malware targeting process controll systems at Siemens Industrial Systems. The malware was looking for information on how to control industrial equipment that operates utility companies and manufacturing plants. The malware was said to be similar to the Stuxnet virus that crippled Iran's nuclear project for more than a year. The malware was able to check for software defenses before launching its own code and then cleaned up behind itself to leave no tracks. It was able to evade defensive software and that is a key point. Malware is getting smarter and companies need FireEye to track, monitor and eventually eradicate this kind of threat.
There have not been any high profile attacks reported in recent months. Each time an attack is reported these cyber security companies typically rise in the market. It would be naive to believe hackers were losing interest. In fact they are even more prevalent than in the past and they are getting smarter. This requires smarter software defenses like FireEye.
Even if a new acquirer does not appear, I believe FireEye will continue to grow in importance and complexity. Eventually they will either rise on their own or become a takeout target.
Shares are cheap so LEAPs are cheap and we can reach out to January 2018 on this position. The market dip on Friday gave us a buying opportunity. Resistance is currently $17.25.
Buy 2018 $18 call, currently $4.00, no initial stop loss.
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