GrubHub (NYSE:GRUB) started as inauspiciously as most food delivery services. There was no doubt there was a market for consolidating food delivery and a stock like GRUB stock.
Just as other sectors have found that focusing on what you do best — like make food — was better than trying to manage various other platforms to grow, so there was a need in food service.
Restaurants usually already run a low margin business. But adding personnel to wait around in case there are orders for delivery, especially in non-traditional delivery restaurants, is certainly not cost efficient.
The other challenge always has been that smaller towns and cities are a bit more far-flung than big cities. Getting food from the restaurant to the customer can be time consuming and inefficient.
And some of these challenges are also the challenges of food delivery services. Some were local services that were trying to scale up. Others started in big cities and were trying to scale down.
Perhaps the best thing to happen for GrubHub was the fact that it started in Chicago. It’s a food city that’s big enough to offer opportunity and small enough that you can target specific neighborhoods to take advantage of volume.
GRUB was founded in 2004 and went public in 2014 after merging with Seamless, an online food ordering company, in 2013. Since then, the stock is up more than 280% and it has an $11 billion market cap. In the past year, GRUB stock is up nearly 140%.
That’s some serious performance right out of the gate.
But from that focused beginning, GRUB understands that to stay alive in a market where the barriers to entry are low, and the aspiring competition is high, you have to grow. Fast.
For one thing, Wall Street knows how to analyze a market sector. And in one such as this, if you’re not growing — whether you’re turning a profit or not — you’re not going to make it over the long-term.
Young companies need to build out their base and prove their value over a diverse marketplace. If they can grow and generate revenue, they can worry about profitability a little further down the road.
The Primary Appeal of GRUB Stock
And that’s just what GRUB has done. Now, GRUB has 85,000 mobile and online ordering restaurants in 1,600 U.S. cities. Some it has grown into, while others it acquired as it has been buying smaller delivery operations around the U.S.
In 2017, just three years after going public, it generated $4 billion in food sales for its restaurant partners. And it serves more than 15.6 million diners.
In Q2, released in late July, net income more than doubled to $30 billion. Revenue was up by 50% and earnings also beat expectations.
What’s more, GRUB announced during the quarter that it was going to purchase white label mobile payment company LevelUp. It’s interesting to note that JPMorgan Chase (NYSE:JPM) pumped tens of millions of dollars into LevelUp to develop Chase Pay and Chase Commerce Solutions.
Indeed, the synergies should be very exciting for GRUB stock investors. Plus, there’s Europe to look forward to.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
