GrubHub is a bad buy, even with Amazon coming out of the food delivery

Jim Cramer of CNBC said Friday that GrubHub was too difficult to acquire, even though the online food distribution company is publishing a surprisingly good quarterly report in the coming weeks.

Amazon, the notorious industry hustler, shut down its four-year-old Amazon restaurant-restaurant project in June that was providing plates to premium members in 20 US cities.

"In the end, Amazon is coming out of the food delivery space – it does not matter," said the animator of "Mad Money." "GrubHub is still facing fierce competition – I think it's far too risky to own here."

"I think this development is out of proportion, Amazon restaurants are tiny," he added.

The shares of GrubHub, down more than 30% from their positions a year ago, rose more than 7% after Amazon ended its competing services there was a little more than a month. Amazon still has an interest in the delivery space with a stake in Deliveroo based in the UK.

The stock has risen more than $ 5 per share since its close on June 11, but Cramer still sees headwinds in the future and is not convinced of its long-term viability.

There is a lot of competition in the restaurant delivery space – it's good for consumers, but bad for business. Uber Eats, DoorDash, Postmates and Caviar, a subsidiary of Square, are part of public and private companies offering a logistics solution between restaurants and hungry customers.

GrubHub's margins were "under serious pressure," said Cramer.

"The company has spent its money crazy to defend its market share, and their efforts (…) have not been successful," he said. "Frankly, you can read Amazon's decision … as an indictment of the entire industry."

Cowen badyst, Thomas Champion, has a different point of view from the host of "Mad Money". He thinks GrubHub could become a potential buyout target for Amazon in the future.

CEO Matt Maloney appeared on "Mad Money" in April, where he badured shareholders that GrubHub's advertising investments would unleash the "lifetime value of your customer." Once they started ordering, we know that they are for life ".

Earlier this week, however, Ritch Allison, CEO of Domino's Pizza, asked if broadcast applications such as GrubHub were sustainable. He conceded that the competition in shipments had reduced pizzas sales in the second quarter before telling Cramer that investors were subsidizing low prices for shipments to take an unprofitable market share.

"We do not know how this will dissipate once consumers have to pay the full cost of this delivery because these fees are quite high relative to the cost of the underlying food product," Allison said at the time. time. "I also think that we have not yet seen what will happen with the supply of restaurants on these platforms."

On Friday 's show, Cramer said the New York State Liquor Authority had established new rules that could affect how GrubHub charges restaurant fees. GrubHub's pricing structure, while negotiable, may cost food partners a 20% marketing fee, a 10% delivery commission and a 3% processing fee on each order, CNBC reported.

If regulation is on the horizon, it could have an uncertain impact on how distribution companies earn money.

"In February, I told you not to get away from GrubHub and all of its listed competitors," Cramer said. "Sometimes an industry is booming, like this one, but there is no real way to invest in it."

GrubHub is expected to release its second quarter results at the end of the month.

Disclosure: The Cramer Charitable Trust holds shares in Amazon.