Grubhub Inc. (GRUB) stock is trading lower by more than 4% in Thursday's 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 first quarter 2020 revenue. The 12.1% year-over-year revenue increase matched expectations, but shareholders walked away after the news, disappointed that the first quarter didn't provide an upside surprise given nationwide stay-at-home orders.

The number of active diners during the quarter rose 24% year over year to 23.9 million, while average orders per day fell 1% to 516,000. Total food sales increased 8% year over year to $1.6 billion, with overall metrics confirming modest but unspectacular growth for a company that continues to struggle with profitability. No second quarter guidance was offered due to the uncertain impact of the COVID-19 pandemic.

It's estimated that nationwide demand for food delivery in March increased 30%, but gains have been split across a heavily competitive landscape, with Uber Technology, Inc.'s (UBER) UberEats, DoorDash, Instacart, and PostMates taking business away from Grubhub and other operations. Unfortunately, the company doesn't expect the outlook to improve in the second quarter because it intends to channel all profits into increased order flow.

Grubhub stock has struggled since 2018, entering a steep downtrend as multiple competitors opened their doors. Attempts to increase revenue through higher service and delivery fees have backfired to some extent, with many customers now going directly to restaurant websites to seek out the cheapest delivery deal. The pandemic has offered a golden opportunity to expand business objectives, but that didn't really happen in the first quarter. 

GRUB Long-Term Chart (2014 – 2020)

Long-term chart showing the share price performance of Grubhub Inc. (GRUB)

The company came public at $40.00 in April 2014 and rallied to $45.80 in August. An April 2015 breakout attempt failed, yielding a steady decline that posted an all-time low at $17.77 in January 2016, ahead of a recovery wave that completed a round trip into the prior high in May 2017. It broke out in August, entering a strong uptrend that continued into September 2018's all-time high at $149.35.

Aggressive sellers took control into 2019, carving a persistent decline that continued into October when the stock found support at the 2017 low in the low $30s. However, the subsequent recovery wave failed at a lower high in February 2020, yielding a vertical downdraft that undercut the 2019 low by three points before bouncing in March. The proportional bounce through April has now reversed at a lower high, indicating that the two-year downtrend remains fully intact.

The monthly stochastic oscillator crossed into a buy cycle from the oversold zone in December 2019 and is still in force after last night's release. This should limit downside in coming sessions while increasing the odds that the stock will bounce back to the April high. However, that level marks heavy resistance at the 50-month exponential moving average (EMA), broken in September 2019. In addition, price action has struggled for months at the .786 Fibonacci retracement of the two-year uptrend, warning that it's vulnerable to a secondary breakdown that reaches the 2016 low in the teens.

GRUB Short-Term Chart (2018 – 2020)

Short-term chart showing the share price performance of Grubhub Inc. (GRUB)

The on-balance volume (OBV) accumulation-distribution indicator topped out in March 2018, seven months before price, and entered a distribution phase that ended in October. It posted a 52-week high in February 2020 and turned lower into March, while the bounce through April has failed to reach the prior high. So far at least, this matches recent price action at the 200-day EMA, which has marked 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 buying signals will remain questionable until OBV and price mount the first quarter peak. That will take plenty of bulls in a mixed market that hasn't rewarded the stock since the February downturn. Low second quarter expectations probably won't help this effort, with investors likely to sit on their hands until the company reports sustained profitability.

The Bottom Line

Grubhub stock is trading lower after the company faied to book first quarter profit and revenue windfalls in reaction to the pandemic.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.