Cowen on Monday raised its price target on GrubHub stock to 38 from 33. Its research report also had positive comments on fast-casual food chain Panera (PNRA) and Amazon (AMZN), which has been expanding its food-delivery service through Prime Now. Cowen raised its price target on Panerastock to 250 from 240.
Cowen says GrubHub remains by far the largest player among third-party providers of online ordering and restaurant delivery. The company lets diners order directly from more than 45,000 takeout restaurants in more than 1,100 U.S. cities and London.
GrubHub stock has soared 70% this year. The stock jumped 24% on July 28 after it Q2 earnings report. GrubHub said net revenue rose 37% to $120.2 million from the year-earlier period, topping consensus estimates of $114 million. EPS minus items jumped 35% to 23 cents vs. analysts' 19 cent estimate.
GrubHub shares, though, fell 1.5% to 40.84 in the stock market today. The stock is in buy range from the 39.39 buy point of a short-stroke pattern.
"GrubHub has attributed the vast majority of the acceleration to specific improvements made following the company's recent technology platform rollout," the Cowen report said. "Examples of improvements include restaurant recommendations and sorting, menu item recommendations, and checkout flow."
Cowen estimates the core GrubHub brands will increase net food sales to $6.8 billion in 2025 from about $2.4 billion this year. That's an increase of 19% in the food delivery market from 10.6%, respectively.
Besides Amazon, other competitors in the food delivery field include UberEats; Postmates; Yelp (YELP), with its Eat24 business; and DoorDash. Amazon launched Prime Now Restaurants in August 2015 in Seattle and now operates in 14 cities.
"While the Prime Now Restaurants service is nascent, we recognize the strategic rationale for the offering," Cowen wrote. It said the restaurant delivery service leverages the existing local delivery infrastructure that Amazon has established for Prime Now.
"If Amazon is able to recreate it's expertise at logistics, business process management, and customer service, the Prime Now restaurant service has strong prospects in our view," Cowen said.
Under Cowen's active restaurant coverage, it is most excited about top-pick Panera's opportunity, with plans to expand its food-delivery service.
"Panera showed the ultimate act of confidence at the beginning of 2016, announcing plans to expand a 25 store test of small-order delivery to 200-300 system locations by the end of 2016," said Cowen.
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