GrubHub takeover a matter of ‘when, not if,’ says Needham

A takeout of GrubHub (GRUB) is a matter of “when, not if,” Needham analyst Brad Erickson tells investors in a research note. He believes GrubHub is the “preeminent acquisition target in the space at the moment.” The analyst sees two possible outcomes. The first being an “aspiring needle-threading acquirer” monitors order volumes into 2020, recognizing that GrubHub’s deceleration combined with ongoing profit headwinds outside of New York City and Chicago will keep the shares range-bound “somewhat below current levels.” The second being an acquirer “with the ability to prioritize securing the asset” versus haggling on price could justify a modest premium above the current share price. Erickson thinks shuttering the GrubHub brand outside of New York City and Chicago while achieving further synergies “would be possible and attractive.” Further, the analyst’s latest round of New York City channel checks indicate that DoorDash is being less aggressive on the margin, which he feels could be helpful for both GrubHub and Uber Eats (UBER). Erickson tell, who sees “little real valuation support” until $30 per share for GrubHub, keeps a Hold rating on the name.