Bears Feast On GrubHub Inc (GRUB) Following Post-Earnings Lows

GrubHub Inc's (NYSE:GRUB) earnings miss has sent the shares to new lows

Oct 27, 2015 at 11:16 AM
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Food-delivery stock GrubHub Inc (NYSE:GRUB) hit an all-time low of $22.49 this morning, as the Street reacts to the company's disappointing quarterly report and underwhelming current-quarter revenue guidance. The shares were last seen about 20% lower at $25.80 -- following the path of another food stock -- and are on the short-sale restricted list. No matter, though. Bears are simply heading to the option pits instead, where puts are crossing at nine times the expected intraday pace. 

On an absolute basis, though, GRUB calls nearly triple puts -- which is business as usual. In fact, over the past 10 sessions, more than 2,700 calls have been bought to open, compared to just 531 puts. Reinforcing this general call bias is the equity's Schaeffer's put/call open interest ratio (SOIR). At 0.55, this reading reveals that call open interest nearly doubles put open interest among options expiring in three months or less.

It should be noted that GRUB sports high short interest levels, which could mean some of these calls were picked up by bears looking to hedge their positions. As of the last reporting period, almost one-quarter of the stock's float was sold short. At average trading levels, it would take shorts more than a week to repurchase their bets.  

There's no question where analysts stand on the stock. Thirteen brokerage firms cover GRUB, 11 of which say it's a "buy" or better, with not a single "sell" in sight. Additionally, the stock's consensus 12-month price target of $43.39 represents a 68% premium to current levels. This morning's earnings miss has yet to sway sentiment among this crowd, but future downgrades are a possibility.

Taking a look at the charts, today's losses put GrubHub Inc (NYSE:GRUB) back below its 10-week moving average, a level that pressured the shares from May through September. The stock now sits 29% below breakeven in 2015. 
 

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