The GrubHub site on an iPhone.
Andrew Harrer | Bloomberg | Getty Images
Shares of food delivery company GrubHub had close to 40% after disappointing earnings and dismal guidance forced Wall Street to leave the already demanding stock.
GrubHub received five downgrades, including double downgrades from both Bank of America Merrill Lynch and Oppenheimer, where companies turned from recommended to buy the stock, to sell.
"Competitive food delivery services (Uber, Doordash and others) erode GRUB usage and are expected to deteriorate in 4Q, suggesting that historical [long tern value] is no longer reliable," said Oppenheimer analyst Jason Helfstein, who dropped his price target on the stock for $ 34 from $ 91
GrubHub has lost more than half of its market value this year as competing food delivery services such as UberEats, DoorDash and PostMate's press fundamentals. GrubHub reported third-quarter revenue of $ 322 million, missing $ 330.5 million in estimates, according to Refinitive.
Earnings were in line with expectations of SEK 0.27 per share. Orders fell 15% since the same period last year, falling further from the 11% decline in the second quarter.
The weak point in the report was the company's guidance in the fourth quarter, which left analysts hoping for the rest of the year. GrubHub, which has a market value of around $ 5.3 billion, said it sees fourth-quarter revenue in a range of $ 315 million and $ 335 million, well below the $ 388 million forecast. The management noted weaker order frequency as the company fails to mature as rivals.
"The food delivery market is increasingly irrational as competitors flood the market with benefits and incentives, making online dining guests less loyal," Bank of America analyst Nat Schindler said in a note to clients.
To combat this irrationality, GrubHub said it will focus on adding non-partner restaurants, expanded national chain integration and restaurant offerings.
"We believe this will accelerate industry consolidation, but GRUB has a weaker currency than the two largest players and we see limited investor demand with slowing growth and declining EBITDA," Helfstein said.
– with reporting from CNBC's Michael Bloom.