CREDIT SUISSE: GrubHub’s recent acquisition may take time to pay off (GRUB)

pulse

September 11, 2017 10:17 PM

The delivery company may not see payoffs from its Eat24 acquisition for at least six months, the bank said in a note downgrading the stock.

Fresh on the heels of the company’s $287.5 million Eat24 acquisition, Credit Suisse analyst Paul Bieber has downgraded GrubHub, citing “uncertainty on acquisition accretion.”

“We are lowering our rating as we believe shares reflect an optimistic scenario for accretion from recent acquisitions,” he wrote in a note published Monday morning.

In short, Credit Suisse believes any growth from the Eat24 buyout will be slow, and could take a full year to materialize.

Specifically, Credit Suisse points to four reasons GrubHub's growth from the Eat24 acquisition is likely to take a while:

Eat24 integration costs.
Delivery mix shift.
Potential investment in marketing to drive growth.
Management conservatism.

The bank’s new price target for GrubHub is $53 — just a few cents shy of Wall Street consensus, according to Bloomberg, and 6.2% below Monday’s closing price.

Shares of GrubHub are up 52% so far this year. The company declined to immediately comment for this story.

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