Yahoo Finance Why Grubhub Stock Fell 15.6% in November
What happened
Shares of Grubhub (NYSE: GRUB) drifted 15.6% lower in November, according to data from S&P Global Market Intelligence, extending a more than 30% decline in October caused by underwhelming quarterly guidance from the food ordering specialist.
For perspective, the bulk of Grubhub's declines last month came despite a lack of company-specific news. Rather, with shares still up around 30% year to date at the start of November, Grubhub mostly appeared to fall in lockstep with a broader pullback in high-flying tech names.
IMAGE SOURCE: GETTY IMAGES.
So what
That's not to say Grubhub's pullback wasn't entirely merited. Though the company's third-quarter results did exceed expectations -- revenue climbed 52% year over year to $247 million, beating estimates by around $9 million, while earnings of $0.45 per share came in $0.04 above consensus -- its prediction for fourth-quarter EBITDA to fall between 12% and 30% left the market wanting more.
Coupled with Grubhub's healthy year-to-date gains and lofty valuation, it wasn't entirely surprising to see the stock pulling back.
Now what
Still, investors should be aware that Grubhub's EBITDA decline is the result of a conscious move by management to sustain its top-line momentum and fend off competitors.
"We have a significant opportunity to accelerate diner growth by broadening delivery coverage areas and increasing marketing spend," explained GrubHub CFO Adam DeWitt. "As a result, we are opportunistically investing an incremental $20 to $30 million in marketing and delivery expansion in the fourth quarter, taking our total 2018 investment in growth to substantially more than $200 million."
As such, I'm not convinced Grubhub's share-price punishment fits its crime. And as soon as its investments in growth begin to yield fruit, I suspect the stock will rebound with a vengeance.
More From The Motley Fool
Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
