Grubhub Inc. (GRUB) stock is trading lower by 4% on Thursday, pre-market session after the food delivery company reported a net loss of $ 33.4 million, or $0.36 per share, on $363 million in the first quarter of 2020 sales. The 12.1% year-to-year increase in sales corresponded to the expectations, but shareholders walked away after the news, disappointed that the first quarter did not provide an upside surprise given the scale of the country of stay-at-home orders.
The number of active diners in the quarter increased 24% year on year to 23.9 million, while average orders per day decreased 1% to 516,000. Total food sales increased 8% year over year to $1.6 billion, with all metrics, confirming a modest but unspectacular growth for a company that continues to struggle with profitability. No second quarter guidance was provided due to the uncertainty of the impact of the COVID-19 pandemic.
It is estimated that the national demand for food for delivery in March rose by 30%, but the gains have been spread across a highly competitive landscape, with Uber Technologies, Inc.’s (UBER) UberEats, DoorDash, Instacart, and PostMates business away from Grubhub and other operations. Unfortunately, the company does not expect that the prospects for improvement in the second quarter because he has the intention to channel all the profits from more and more order flow.
Grubhub stock has struggled since 2018, entering a steep downward trend several competitors have opened their doors. Attempts to increase revenue through rates and service delivery costs has had the opposite effect, to a certain extent, with many customers now go directly to the restaurant websites to look for the least expensive delivery of the case. The pandemic has offered a golden opportunity to expand the objectives of the company, but that didn’t really happen in the first quarter.
GRUB Long-Term Chart (2014 – 2020)
The creation of the public company to $40.00 in April 2014 and rallied to the $45.80 in August. In April 2015 breakout attempt has failed, which gives a steady decline, which has posted lower at $17.77 in January 2016, before a resumption of the wave which has completed a roundtrip in the state of the high in May of 2017. It broke out in August, entering a strong upward trend which continued in September 2018 all-time high at $149.35.
Aggressive sellers have taken control in 2019, carving a persistence of the decline, which continued in October, when the stock has found support for the 2017 low in the low – $30. However, the subsequent recovery of the wave has failed at a lower high in February 2020, which gives a vertical downdraft that affected the 2019 weak by three points, before surging in March. The proportional rebound in the month of April has now changed to a lower high, which indicates that the two years of the downward trend remains intact.
The monthly stochastic oscillator through a buying cycle from the oversold zone in December 2019 and is still in effect after the last night of the release. This should limit the downside in the coming sessions, while increasing the probability that the stock will bounce back to the April high. However, this level marks a strong resistance at the 50-month exponential moving average (EMA), broken in September 2019. In addition, the price action has struggled for months to the .786 retracement Fibonacci of the two years of the upward trend, warning that it is vulnerable to a secondary breakdown that reached in 2016 low in the teens.
GRUB in the Short-Term Chart (2018 – 2020)
The balance volume (OBV), the accumulation-distribution indicator topped out in March 2018, seven months before the prices, and entered into a distribution phase that ended in October. Posted 52 weeks in February 2020 and turned down in March, while the rebound in the month of April has failed to reach the prior high. For the moment, at least, this corresponds to recent share price to the 200-day EMA, which marked the resistance since it was broken on heavy volume in October 2018.
It will now take a rally above the moving average to improve the mixed technical outlook, but the buy signals to remain questionable up to the OBV and the price rise in the first quarter of tip. That will take a lot of bulls in a mixed market has not rewarded the stock since the month of February, a period of economic downturn. Low second quarter expectations will most probably not contribute to this effort, with investors likely to sit on their hands until the corporation has sustained profitability.
The Bottom Line
Grubhub stock trading lower after the company faied to book first-quarter profit and additional revenue in response to the pandemic.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.