NEW YORK ( TheStreet) -- Shares of GrubHub ( GRUB) are climbing after research firm Barrington upgraded the stock to Outperform, which is the firm's Buy-equivalent rating, in a note to investors today. GrubHub enables users to place restaurant pickup and delivery orders using the Internet.
WHAT'S NEW: GrubHub has several strengths, including its status as the first company to enter its business, a "highly profitable business model," and significant momentum, Barrington analyst Jeffrey Houston wrote. Moreover, GrubHub should have no problem increasing demand for its service, given its convenience and compelling nature, Houston contended. The analyst's primary concern about the stock had been looming lockup expirations and its high valuation, he stated. Lock-up agreements, a typical feature of a company's initial public offering, prevent certain shareholders from selling for a set amount of time after the offering. However, GrubHub's final lockup expiration occurred during the first week of December, and the stock fell 8% from mid-September to yesterday's close, lessening these concerns, Houston explained. Meanwhile, GrubHub has several upcoming potential catalysts, including expansion to chain restaurants and lunch, according to the analyst, who set a $43 price target on the shares.
PRICE ACTION: In early trading, GrubHub rose 1.5% to $36.39.
Reporting by Larry Ramer.