Goldman Sachs downgrades Grubhub stock

Goldman Sachs downgraded its recommendation for GrubHub stock from “buy” to “neutral” Tuesday, Oct. 29, 2019, after the company released disappointing results.

• Facing stiff competition in its space, the company’s earnings dropped in the third quarter of 2019.
• Its stock, meanwhile, has lost half its value this year.
• GrubHub, meanwhile, says it going after new restaurant partnerships and investing heavily technology, which Goldman analysts do see as a good long term plan.
• However, not only did the firm change its recommendation on the stock, it also adjusted its 12 month price target to $30, a significant decrease from its previous $86.
• “We got this wrong,” wrote Goldman Sachs analyst Heath Terry to its clients.
• Grubhub also published a lengthy statement to shareholders ahead of earnings announcements that said it does not believe “that a company can generate significant profits on just the logistics component of the business.”
• Instead, GrubHub sees opportunity in partnering with local restaurants as an online advertising partner — and the food develiery services themselves are just a means to get to that point.