Grubhub Inc. (GRUB) shares fell more than 40% during Tuesday's session after the food delivery company reported its third quarter financial results and fourth quarter guidance. Revenue rose 30.3% to $322.1 million, missing consensus estimates by $7.44 million, while non-GAAP earnings per share came in at 27 cents, missing consensus estimates by one cent. Adjusted EBITDA also fell 10% to $53.8 million and missed consensus estimates of $56.2 million for the quarter.
Management expects fourth quarter revenue of $315 million to $335 million, missing previous guidance of $387 million, with EBITDA of $15 million to $25 million, missing previous expectations of $79 million. These sharp downward revisions come from an anticipated slowdown in its top-line revenue and increasing spending that could have a negative impact on the bottom line.
Analysts responded negatively to the news. Oppenheimer downgraded Grubhub stock to Underperform and slashed its price target from $91 to $34 per share, while Craig-Hallum downgraded the stock to Hold and cut its price target from $100 to $40, citing deteriorating trends and increased investment.
From a technical standpoint, the stock broke down to test support dating back to early 2017 during the session. The relative strength index (RSI) fell to oversold levels of 19.82, but the moving average convergence divergence (MACD) experienced a bearish crossover. These indicators suggest that the stock could see some consolidation, but the trend remains decidedly bearish over the intermediate term.
Traders should watch for some consolidation between trendline support and the open at around $40 per share over the coming sessions. If the stock breaks out higher, traders could see an eventual move higher toward trendline resistance at around $50.12. If the stock breaks down lower, it could retest lows of around $20.00 that it hasn't seen since early 2016. However, analysts believe that $30 to $40 could be a fair valuation.
The author holds no position in the stock(s) mentioned except through passively managed index funds.