GrubHub isn't delivering.
Shares of the Seamless parent cratered after a major third-quarter earnings whiff Tuesday, falling more than 43% in a single trading session to a new 52-week low. It was the worst daily performance in the stock's history.
With GrubHub's weaker-than-expected fourth-quarter earnings forecast also weighing on shares, experts are concerned about what's ahead for the delivery giant.
Matt Maley, chief market strategist at Miller Tabak, fears the stock could even retest its 2016 lows of $17.77 — a more than 46% drop from its Tuesday closing price of $33.11.
"There's no question ... that this is a broken stock," Maley said Tuesday on CNBC's "Trading Nation." "The stock's been going down in pretty much a straight line for a year, and its weekly [relative strength] chart is the most oversold it has ever been."
Maley pointed out that prior to GrubHub's Tuesday trough, the stock had already broken below a key trend line extending from its 2016 lows, attempting and failing three times to break back above it. Its third attempt came ahead of the Tuesday morning report.
"It's failed dreadfully in the last couple of days," he said. "Any long-term players, I think the stock's going to at the very least go back and retest its 2016 lows below $20."
But that doesn't necessarily mean it's time to short sell GrubHub, the strategist said.
"It's not a stock I'd want to short right here, and short term, really nimble and very short-term players might look to buy the stock," Maley said, adding that its historically low relative strength reading could prime it for a "short-term pop."
"Short-term players, you might be a little nimble, but longer-term guys, I'd still want to avoid the stock," he said.
Gina Sanchez, founder and CEO of Chantico Global, said the fundamental picture also supported the bear case.
"If you look at what came out in the earnings call and in the shareholder note, really, you're looking at a CEO that's highlighting increased competition — so, DoorDash has been taking a lot of business away from Grubhub — and the fact that their margins have also been falling," Sanchez said in the same "Trading Nation" interview.
"The entire business model of GrubHub is also changing," she said. "It went from being a marketplace where it had relationships with its restaurants to now, it's just another delivery service. Those margins are razor thin."
And while GrubHub plans to spend more to maintain a hold over its position in the increasingly competitive delivery space, it hasn't laid out a specific plan, which is likely worrying shareholders, Sanchez said.
"They have a whole lot of different plans, and that's not very reassuring for investors," she said. "I'm not sure that I would be stepping in at this point. And if you look at analyst recommendations still, 51% of analysts still have a buy rating on GrubHub, with an average target of $76. So, I'd say that we still have a lot more to go in terms of pessimism kind of catching up with the fact that this business model has changed, margins are compressing and I don't see it changing."
