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