Citi upgraded its rating of GrubHub (NYSE:GRUB) shares to buy from neutral on Tuesday, saying it sees a "more favorable" opportunity for the stock to climb.
Citi gave five primary reasons for its upgrade, including GrubHub’s improvement in its delivery network “efficiencies” and possible partnerships with large chains such as McDonald’s (NYSE: MCD) and Starbucks (NASDAQ:SBUX)
"We recently came across data suggesting that GrubHub may be in early tests with McDonald’s, Starbucks and other large chains, which could drive investor interest," Citi said.
Additionally, despite "fierce" competition, Citi said "the online food delivery market’s growth remain robust and has even accelerated of late."
Another factor: Dunkin (NASDAQ:DNKN) announced last week that it is partnering with Grubhub to begin the rollout of its new Dunkin' Delivers service. As the first step in this launch, today more than 400 Dunkin' restaurants throughout New York City's five boroughs will now offer delivery through Seamless, Grubhub's New York brand.
Following the initial launch, Dunkin' and Grubhub will look to expand the Dunkin' Delivers service to restaurants throughout other markets in the coming months, including in Boston, Chicago and Philadelphia.
Citi raised its price target on GrubHub shares to $91 from $75.
Earlier in June, Exane started GrubHub at an Outperform rating and $84 price target, implying a 33% upside.
In the past three weeks, GRUB received a Buy start at research firm
Gordon Haskett, a warning on near-term pressures from Jefferies, and advice on "tough choices" amid competitive pressures from Needham.
GrubHub shares jumped $6.04, or 8.4%, to $78.23 a share.
