Here is GrubHub's big opportunity: Most people have no idea what it is.
In a national survey, Morgan Stanley found that 44% of New Yorkers had never heard of the online food-ordering and delivery company or its Seamless unit.
Across the rest of the US, nearly 80% of people were clueless.
Yet this is precisely the best thing going for the company.
"Low penetration and consumer awareness could drive a 5x expansion in GRUB's user base," Morgan Stanley's Dean Prissman wrote in a note Wednesday.
The firm notes that adoption of the service across the US is just 5%, with New York's 13% adoption rate — which the firm called "undemanding" — topping the list of the most popular GrubHub markets.
"We believe increasing awareness will result in a broad-based secular shift where, over time, a substantial portion of consumers in all markets will eventually order food online and GrubHub will be a direct benefactor," the firm wrote, adding that its research found that consumer habits with respect to ordering out were nearly identical across small and big cities.
So as more people begin ordering food online, they will be choosing to use GrubHub or Seamless — or so Morgan Stanley thinks. By the firm's analysis, GrubHub has the potential to serve 109 million people across the country.
Morgan Stanley initiated coverage at "Overweight," with a share price target of $50. Shares were little changed at about $42 in trading Thursday, and they are up nearly 17% year-to-date.
The company is already taking steps to make itself more popular. In its fourth-quarter earnings release, it announced it had completed the acquisition of two similar companies — DiningIn and Restaurants on the Run — to expand its footprint.
In the most recent quarter, its revenues rose 50% year-over-year to $73.3 million, while net income surged 381% to $10.8 million.
Here's a chart of Morgan Stanley's projection of how GrubHub will grow over the next few years.
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