Grubhub owner considers sale, Lululemon to focus on men’s business, Roblox downgraded

Yahoo Finance Live anchors discuss three trending stocks they're watching today.

Video Transcript

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DAVE BRIGGS: Welcome back. Let's get started with today's Triple Play, the stock I'm watching today, justeattakeaway.com. The ticker symbol's a little tricky, JTKWY, they are the parent company of food delivery app Grubhub. And they are going to sell, prospectively sell, Grubhub, or find a strategic partner. They don't like the numbers they're seeing which are deliveries down 5% in North America, down 1% globally.

One of those stocks that you talk about like Netflix, like Peloton, that peaked during COVID, during lockdowns, during stay at home, and now is certainly looking like one that cannot grow in the future. They are down 70% in the last 12 months. As for the stock, they bought it for $7.3 billion paid for Grubhub about a year ago. Not bright prospects. The stock today, marginal gains.

BRAD SMITH: You know, I'm glad you brought this one up because it really shows us how much some of the deceleration is actually taking place in front of our eyes. When you see the restaurant and food services businesses starting to reopen back up, many of them relying on services like Grubhub, like Uber Eats, and the subsidiaries that many of them had been able to take on. We saw the sale of Caviar.

And particularly with all of those assets moving around within this industry over these past two to three years, some of those deals taking place before the pandemic, some of them settling as recent as last year, as you mentioned, that just goes to show us not only the number of consumers who are going to continue to rely on these services but also on the gig economy front, what types of jobs are also going to be vacuumed out if we do see a mass deceleration in the number of orders because we know how much the pandemic had really thrust consumers to rely on these services in the interim period.

DAVE BRIGGS: Food delivery as a concept seemed like it's here to stay.

BRAD SMITH: Yeah.

DAVE BRIGGS: But certainly not to the volume--

BRAD SMITH: Absolutely.

DAVE BRIGGS: --which we've seen over the last 24 months.

BRAD SMITH: You've got ghost kitchen setups, so many things around this economy.

DAVE BRIGGS: And the competition to your point, a big point.

BRAD SMITH: Absolutely. The company that I'm watching here on the day, ticker symbol LULU, Lululemon. Yeah, it's lower on the day. However, there's some good news that they're putting out there, Lululemon plans to double its 2021 revenue of $6.25 billion to $12.5 billion by 2026. The company plans to do this by launching a new two-tiered membership program later on this year, also aiming to quadruple its international revenues relative to 2021 by 2026. And also by doubling the size of its men's revenues in 2021 by again, say it with me, 2026.

So these targets would also mean that the company is looking to achieve a total net revenue compound annual growth rate of about 15%. However, I will go as far as to say that they will not see the same type of growth acceleration over these next few years as they have over these past two. And here's why, you've got people entering back into social structures, looking for different types of clothing that they're going to buy into.

Everybody has a different appreciation for comfort at this point, and sure, it's come with the categories that they've continued to lean into. However, within that you're also going to look at more of this push back toward either fast fashion or even some of the more value fashion at the same time, whether that means consignment, whether that means The RealReal, or some of the StockXs of the world, are able to benefit. That's great for them but what does that mean for Lulu in the interim period of time and over some of these long term targets?

DAVE BRIGGS: We want to get Rachelle to weigh in. I got to disagree, I think we've made that pivot and we're not going back to some of the types of clothes that we were wearing--

BRAD SMITH: We're not going back to suits.

DAVE BRIGGS: --pre-pandemic. And look, right now, I'm wearing Lululemon pants--

BRAD SMITH: Got them. ABCs.

DAVE BRIGGS: --on television.

BRAD SMITH: Yeah.

DAVE BRIGGS: They are comfortable and they are functional even in the workplace. The question I have about men's is if they want to double the revenues are they ever going to increase the size in the store, the footprint is that little corner as you walk in stores, is it going to be 50-50, if you're really going to go after the men's clothing market, Rachelle?

RACHELLE AKUFFO: Well, the thing is, though, we have to remember we're still in the very early days of return to work. Even though obviously, we've seen all the headlines, a lot of companies are still figuring out this sort of hybrid model. You want people to be comfortable but you also still want people to look professional.

And obviously, Lululemon expanding into menswear, they already really have this core consumer base, you have to wonder if they're going to want to keep jumping on these continuous trends if perhaps they're not going to be wearing as much athleisure wear. And you know, as people return to work, perhaps they have less time to work out or have to readjust their sort of working out from home, versus working out at a gym. That might also chip away but they're also now with renting, and as you mentioned with the resale market as well. So a couple of things they might have to contend with.

Now speaking of pandemic darlings, my pick for the day is Roblox, and the ticker symbol is RBLX. Now, this was an interesting one, a pandemic darling, a lot of kids who were homeschooling, stuck at home during the pandemic. Now that they're back at school and having other interests, Roblox really scratching its head.

We did see that the stock is down today as you can see there, and also down year to date, down more than 12% today, over 64% year to date. And we did see that it was downgraded to neutral at Goldman Sachs. Now a lot of people are wondering, is Roblox really some insight into what we can expect with the overall metaverse, as we've already seen Meta, otherwise known as Facebook, also not really doing well. But is this an investment in the future or perhaps is this a sign that the metaverse may fall flat?

Now, one of the things we have to keep in mind is they are battling with very high commission rates, if you thought Meta's was high at 47.5%, Roblox's is 72%. You also have some legal challenges. Kim Kardashian threatening to sue Roblox because one of their gamers claimed to have an unreleased sex tape of Kim Kardashian. And we did see that Roblox has now banned that user but it still goes to show how much exposure Roblox has to potentially getting sued if they're not keeping track of what some of their creators are doing.

And then you have to wonder, I mean, the CEO and founder Dave Baszucki just got a $233 million pay package. Meanwhile, as we said, the stock is still very much down year to date. So a very uncertain future for what once was a pandemic darling in Roblox.

BRAD SMITH: Yeah, Rachelle, when you brought up that tape I turned to Dave here in studio and said did you want to comment on that? But I think at the end of the day, for Roblox, one huge thing that we are going to be keeping an eye on going forward from here is how they're able to not only retain so many of the users that they amassed over the course of the pandemic because we do know that gaming as a broader sector and industry is still continuing to see its broader inflection point, whether that be metaverse related or not. And for Roblox, how they're able to attract some of those younger users, that's been key to their own growth strategy as of right now.

DAVE BRIGGS: One of the younger users was her son, Saint West, that's how she discovered this ad about the tape. And Kim K's response and I'll be quick, "I have all the time, all the money, and all the resources to burn them all to the bleeping ground." That was Kim K's response to Saint West finding that ad on Roblox. You have not heard the end of this one.

BRAD SMITH: So you did have something to say on it?

DAVE BRIGGS: I did.

BRAD SMITH: That's what you're telling me?