GrubHub Earnings Reaction Sparks Heavy Options Trading
GRUB's November 35 put is most active in early trading
Karee Venema
Analysts have been quick to chime in after GRUB earnings
GrubHub Inc (NYSE:GRUB) reported third-quarter adjusted earnings of 27 cents per share -- in line with the consensus estimate -- on $322 million in revenue, well below the $330.5 million analysts were expecting. The company also gave lower-than-anticipated current-quarter guidance amid rising competition in the food delivery space.
In a letter to shareholders, GRUB CEO Matt Maloney said the firm will be "spending more and trying many different strategies over the next 12-18 months," including "investing aggressively in our independent restaurant sales organization." This plan has drawn a quick reaction from analysts, with Guggenheim downgrading GrubHub stock to "neutral" from "buy," saying the strategy is "unproven," and creates "greater uncertainty."
Craig-Hallum also lowered its rating on GRUB shares, to "hold" from "buy," and slashed its price target by $60 to $40. Prior to today, most analysts were bullish on the equity, with 13 maintaining a "strong buy" rating, compared to eight "holds," and one "strong sell." Meanwhile, the average 12-month price target of $81.42 is still a 56.7% premium to current levels.
Against this backdrop, GRUB stock hit a two-year low of $35.15 out of the gate, and was last seen down 39.6% to trade at $35.26. This puts the equity on the short-sale restricted list, and has options activity running hot in early trading. Already today, roughly 21,000 contracts have crossed -- a near-even split between calls and puts -- surpassing the average daily volume of 9,045 options. The November 35 put is most active, and new positions are being initiated here.