GrubHub has captured this trend and is growing rapidly.
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GRUB - GrubHub - 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.
In Q2 net revenue rose +37% to $120.2 million topping estimates for $114 million. Earnings rose 35% to 23 cents and also beating estimates for 19 cents. They guided for the current quarter for revenue in the range of $116-$119 million and analysts expected $113 million. At the midpoint that would be another 37% rise.
GrubHub active diners rose 24% to more than 7.35 million. They added 382,000 in Q2. 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 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 Oct 27th.
Shares spiked to $39 on the earnings and then spent a month in post earnings depression, dropping back below $36 in mid August. The rebound has begun and Monday's close was a new 14-month high. Initial resistance is $41 and our best-case target is $47.
I am using the December option so there will be some expectation value when we close the position ahead of earnings.
Buy Dec $42.50 call, currently $3.10, initial stop loss $35.85.
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