GrubHub Merger Logical Bridge To Food Delivery Consolidation
Press reports this week indicating that online food delivery operation GrubHub (GRUB) was exploring strategic alternatives, including a possible sale or merger, jump-started the stock but now the company is refuting the sale process part of the equation. Regardless of which route they prefer, this sector is in dire need of a structural realignment and I suspect we will see that transpire this year.
For the food delivery companies, the business model is just really, really difficult. There is no way that a restaurant and a third party delivery service can both make reasonably good margins if I want a burger, fries, and shake delivered to my house in an hour or less. GRUB does a lot of business in high density urban areas like New York, where delivery routes are more efficient than in the suburbs, but still the company barely makes any money. EBITDA per order between 2014 and 2018 averaged anywhere from $1.01 to $1.18 depending on the year. Imagine the volume you must do to build that into anything worthwhile. No wonder investors have soured on the stock:Read More
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Peridot Capital Management LLC is a Seattle-based independent registered investment advisor (RIA), specializing in highly customized investment management services for individuals and families. Their strategy is based on historical stock market data dating back to the 1800’s which shows a strong inverse correlation between stock valuations and future share price performance.