KeyBanc Capital Markets analyst Andy Hargreaves maintains a Sector Weight rating on GrubHub's stock.
KeyBanc's deep dive and analysis of proprietary data point to GrubHub's cohort sizes declined sequentially in both the third quarter and second quarter, Hargreaves wrote in a note. Prior to the second quarter, the company took advantage of customer cohort growth and showed a sustained period of revenue growth.
The deep dive isn't all bad news for GrubHub as spending retention trends are stable but can be approved, Hargreaves said. Over the past six quarters, 33% of new GrubHub customers ordered in the subsequent quarter and average customer retention falls to below 20% after three quarters.
Looking forward, GrubHub is focusing on adding new supply to its platform and promote its service to close the "perceptual gap" with DoorDash. However, it's unclear if GrubHub can gain a competitive advantage to reverse the notable share gap. As such, GrubHub's path to sustained growth looks to be "long and difficult."
GrubHub enters 2020 with lowered expectations from Street analysts, but Hargreaves said the company may find it difficult to match estimates in 2020 and beyond. The sentiment could improve if management shows evidence that strategic initiatives are directly translating to improving trends in customer acquisition and retention.
Shares of GrubHub are trading down 5.8% to $40.08 at time of publication Thursday.
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