It looks as though the ongoing love affair between investors and GRUB is set to continue with a sharp spike in the share price. The share price has nearly doubled since the start of the year, is there any more upside left? Jul-25-18 GrubHub tops estimates as more customers order online, stock hits record Reuters +25.47% Grubhub acquires mobile restaurant ordering startup for $390M American City Business Journals Edited Transcript of GRUB earnings conference call or presentation 27-Apr-17 2:00pm GMT Thomson Reuters StreetEvents Why Shares of Grubhub Are Surging Today Motley Fool
It looks as though this short-term spike in the share price could evaporate quite quickly with consolidation at or around the $125 mark. It is interesting to see the company is acquisitive and looking to grow. I would wait until the short term traders have sold up and moved on to the next share, which will probably see the share price a little lower down. One to buy and took away if the growth story holds up.
There was a short term correction with this one which was the time to buy. However, the shares are back in growth mode! The beauty of a strong share price for this type of acquisitive company is that they can issues new paper to buy companies, taking advantage of the strong share price. Then, assuming the acquisitions are earnings enhancing from day one, they will grow profits, keeping analysts happy thereby strengthening the share price in the future. All good at the moment Still one to buy and tuck away I think. The market in which they operate is huge and there will be takeover opportunites aplenty in the future.
This is a stereotypical growth company using high valued paper to acquire competitors which means that all acquisitions are immediately earnings enhancing. As momentum continues to build, the share price continues to push ahead and the highly rated paper can be used time and time again to take out competitors. As long as the company is growing there should be no problems but when growth begins to stall that is the time to bail out.
The company's short to medium strategy of using paper to fund acquisitions is brilliant! Each acquisition is earnings enhancing from day one because of the high company valuation. This uptrend could last for many months yet - it will only start to fall apart at the first signs that the company is over paying and cost savings/profits are not what analysts expected. Human nature ensures the shares will get over bought and then ping back, probably to an over sold position.
One note of warning - in troubled markets (which we could see as a consequence of political issues and the China spat) it is the highly rated paper which is often hit first. Companies like GRUB are highly leveraged to economic growth so will suffer more than most if it does slow.
Be careful with this one, there would appear to be a head and shoulders pattern in this graph? This is the type of stock which could be hit hard if the economy starts to slow because at the moment it is built on highly leveraged paper incorporating a significant amount of hope value. If the shares were to take a major hit this would reduce the ability to leverage paper to expand and grow the business. Should we expect a period of consolidation? A quiet time on the acquisition front?
As was suggested, this stock has been hit fairly hard in the recent downturn leading to a significant share price fall. As the company continues to expand, the use of high-value paper will not really be an option in the foreseeable future. Will growth begin to stall? https://www.fool.com/investing/2018/12/11/why-grubhub-stock-fell-156-in-november.aspx
This one is a prime example of the dangers of using paper to grow a business. Once the value of your paper is weakened this can bring the whole company crashing down and then the cycle is repeated and repeated, etc.
When you rely on the power of your own paper to grow the company it gets near impossible when the market has a correction. Would the company not have been better off raising cash with a placing or rights issue rather than just issuing paper to buy other companies. They could have held fresh funds back for a "rainy day" - then again when in growth mode investors just want never ending growth.
