As explained in previous posts the numbers just do not lie and do not work... Aivars Lode
Grubhub Inc. shares headed toward their biggest one-day decline ever Tuesday, underlining intensifying concerns among investors over the future of the food-delivery industry.
Shares slumped 43%, on track to close at their lowest level in more than two years.
The rout began late Monday after the Chicago-based company cut its outlook for revenue and profit, citing the need to spend more on promotions to draw in customers.
Both analysts and company executives have for years warned that increasing competition among restaurants and delivery apps for customers’ dollars would eventually force a shakeout in the industry. Grubhub Chief Executive Matt Maloney suggested competition was heating up and said that raising funds was also becoming tougher with the fall of startup WeWork making private investors skittish.
“Right now, we are in a weird bubble that is about to burst,” Mr. Maloney said in an interview with The Wall Street Journal Monday.
Analysts quickly slashed their ratings for the stock, with Bank of America Corp. and Oppenheimer & Co. both flipping from “buy” to “sell” recommendations.
“The food delivery market is increasingly irrational as competitors flood the market with rewards and incentives, making online diners less loyal,” said Nat Schindler, a Bank of America analyst, in a note. Rising pressures among delivery services to offer incentives are likely to not only increase the cost of attracting diners, but also potentially reduce the number of repeat orders, Mr. Schindler said.
Shares of other startups that have made their debuts in the public markets in recent years took a hit Tuesday, with Uber Technologies Inc. down 2.7%, Spotify Technology SA down 3.2% and Beyond Meat Inc. down 19%. That was even as the S&P 500 edged up 0.1%.
By Akane Otani - Wall Street Journal
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