Grubhub smashes expectations, reports a record third quarter – but share price declines?
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Grubhub smashes expectations, reports a record third quarter – but share price declines?

Market-leading food order and delivery service Grubhub reported record earnings for the third quarter of 2018, easily beating the Street’s expectations and providing strong guidance for the coming quarter. However, the company’s share price declined on the back of the news. What’s causing this unexpected response from investors? It’s highly likely that negative sentiment on the market is obscuring what are, by any standard, fantastic results. And Brian Feroldi, writing at Motley Fool, notes that overly-cautious investors may be reacting to Grubhub’s stated plan to spend more on marketing and expansion in the fourth quarter.

Investors responded bizarrely to Grubhub’s best-ever third quarter

graph 2910 grubhub

Source: Yahoo Finance

Grubhub posted a revenue rise of 52% against the third quarter of 2017, delivering $247 million. That’s an easy beat against analysts’ expectations of $239 million. It also managed a 61% year on year increase in earnings, bringing in 45 cents per share. Again, that’s an easy beat against consensus estimates of 41 cents. Lastly, the company increased its guidance on revenue for the fourth quarter to a range between $283 million and $293 million. That blows analysts’ hopes for $272.3 million in revenue out of the water.

Understandably, Grubhub’s CEO and founder Matt Maloney was keen to highlight the incredible strength of these results, and the positivity of Grubhub’s immediate future. In a press release, he said:

"We added more organic new diners this quarter than ever before, helping drive the highest organic DAG growth we've seen in a year and a half. Better restaurant selection, a more intelligent diner platform, and more strategic marketing continue to bring more high-quality diners to Grubhub. With solid traction in new diner acquisition over multiple quarters and increased coverage across the country from our delivery expansion, we are in prime position to invest incrementally in advertising and accelerate online ordering adoption."

Dominion holds Grubhub in its Global Trends Ecommerce Fund.

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