Is Grubhub Profitable In 2024? (Not What You Think)

Grubhub (NYSE: GRUB) revolutionized food delivery when it first launched in 2004. The company quickly grew to become a leading platform, facilitating over half a million orders per day at its peak. However, despite its meteoric revenue growth through mergers and acquisitions, Grubhub finds itself in a difficult position heading into 2023.

In this expert analysis, we‘ll analyze Grubhub‘s historical growth and profits, the recent challenges it has faced, and whether investors can realistically expect it to return to profitability this coming year.

Grubhub‘s Growth Trajectory: The Good Times

Grubhub went public in 2014 to much fanfare. In its early years as a publicly traded company, the firm saw tremendous topline growth:

Strong organic demand, combined with major acquisitions like Eat24 in 2017, put Grubhub on a rapid growth path. Its revenue hit the $1 billion mark just 4 years after its IPO.

Importantly, while growing quickly, Grubhub also managed to keep profitable in these early years:

Its net income peaked at $78 million in 2018. The company also compared favorably based on profit margins to leading tech growth stocks at the time.

However, starting in 2019, Grubhub took a turn for the worse.

The Tide Turns: Losses Mount Over Past 2 Years

Grubhub‘s losses began piling up in 2019 and accelerated over the past two years:

• 2019 net loss: $18 million
• 2020 net loss: $156 million
• Stock declined over 60% from late 2018 to early 2022

The company has attributed these losses primarily to four headwinds:

1. Decline in food delivery demand from pandemic peaks: Order frequency dropped as diner behavior normalized post-COVID. This negatively impacted order volume.
2. Increased competition: Platforms like DoorDash and Uber Eats chipped away market share through aggressive subsidy programs. This forced Grubhub to up investment in promotions and advertising to retain users.
3. Higher operations costs: Grubhub had to ramp up support staff and logistics to handle the pandemic peak in order volume in 2020. As volumes declined, these costs became bloated overhead expenses.
4. Restaurant commission relief: To support struggling restaurant partners, Grubhub lowered commission fees during COVID shutdowns. This improved merchant sentiment but compressed the company‘s take rate on each order.

Collectively, these factors have created a perfect storm over the past two years where costs have mounted while Grubhub‘s growth and revenue generation stalled.

Path Back to Profitability Appears Slow, Uncertain

Given the market dynamics, Grubhub returning to strong profitability in 2024 seems unlikely without major changes, according to industry analysts.

JP Morgan analyst Doug Anmuth recently wrote that Grubhub is expected to generate an earnings before interest, taxes, depreciation and amortization (EBITDA) loss of $150 million in 2024. This factors in continued heavy competition between major food delivery platforms.

DoorDash in particular poses an existential threat. It has continued taking market share through aggressive user acquisition tactics while also rapidly moving into non-food delivery, positioning itself as an all-encompassing "super-app."

So when can Grubhub realistically expect to achieve profitability again? Based on my analysis, 2024 would be the absolute earliest, assuming the following initiatives:

• Optimize Grubhub+ subscription offering to increase membership and order frequency.
• Lower advertising costs by reducing reliance on third party channels. Focus on retention and direct marketing to current users instead.
• Renegotiate commission rates with restaurants to stabilize take rates as order volumes increase.
• Slow Rollout of non-food verticals to expand addressable market. Compete with DoorDash‘s "super-app" strategy.

The Verdict: Unprofitable For Now, Future Uncertain

In conclusion, Grubhub generated profits for years after its IPO, but it now finds itself in a difficult position. The combination of post-pandemic slowdowns, increasing competition, and bloated costs have generated steep losses over the past two years.

While Grubhub still maintains a strong market position as the #2 food delivery player, its path back to profitability relies on flawless execution across customer acquisition, restaurant partnerships, and operating efficiency.

With the food delivery space still evolving rapidly, Grubhub has its work cut out for it to adapt and survive. Profitability likely won‘t return until 2024 at the very earliest.

What‘s your take? Where do you see Grubhub headed from here?