GrubHub shares rallied nicely in the wake of the company’s strong earnings report this week, which beat estimates. The stock climbed 6.2% during regular trading hours on Thursday to close at $39.76 per share. As of this writing, shares of GrubHub were up 2.99% to $40.95 per share.

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The steady increase in the share price means GrubHub could set a new record high, as it is now inching closer and closer to its all-time high of $42.76 per share, which was set on Aug. 22.

GrubHub beats on user growth

In a report dated Feb. 5, Canaccord Genuity analysts Michael Graham and Austin Moldow reiterated their Buy rating and bumped up their price target for the company from $45 to $50 per share. They say GrubHub posted a “seasonally strong” fourth quarter driven by a “significant beat on diner growth.”

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They point out that the company’s growth barely slowed down even though it had a difficult comparable quarter last year. The analysts added that GrubHub benefitted from advertising on TV and has begun to make progress with its delivery strategy through the pending acquisitions of DiningIn and Restaurants on the Run.

The Canaccord Genuity team said GrubHub’s valuation is still at a premium, but they think estimates for the company’s earnings results going forward are still conservative. As a result, they think the company’s shares are “the best estimate revision story in the sector.”

The good in GrubHub’s earnings report

The analysts point out that the addition of 460,000 new diners during the fourth quarter was very strong, coming out significantly ahead of their estimate of 370,000. GrubHub also beat on average order value, which came in at $27.24, again beating their estimate of $26.56.

The company also saw its EBITDA margin expand 100 basis points sequentially and 750 basis points year over year. Additionally, guidance for the first quarter and full year were higher than estimates. Management said they expect $24 million on the top line due to acquisitions.

The bad in GrubHub’s earnings report

On the negative side, the company did miss the take rate slightly, coming in about 7 basis points lower than expected. Also ad spend per net new diner increased a bit year over year.

The Canaccord Genuity team raised their estimates for GrubHub based on the latest earnings report. They’re now estimating full year revenue of $345 million, up from $320 million. They’re estimating ETBIDA of $106 million, up from $95 million previously.

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