Waitr: Special Delivery At A Discount To Peers

Summary

• Waitr is a rapidly growing online restaurant delivery platform in 11 Southeastern States, trading substantially below peers, despite its faster growth. We see 50-100% upside over the next 12-18 months.
• Waitr is going public through a merger with SPAC Landcadia Holdings. Given the unconventional nature of SPACs, we believe many investors are unaware of this investment opportunity.
• Online restaurant ordering is still in its early stages in the US. GrubHub trades at 10.4x/8.1x 2018/19 EV/revenue vs. Waitr 7.4x/3.9x 2018/19 EV/revenue, despite over 2x GrubHub's growth rate.
• We expect continued industry consolidation. Acquisitions should put a floor on Waitr’s shares and could help generate a significantly higher multiple and stock price.
• Waitr’s position as a number 1 player in tier-2 and 3 cities insulates them from competitors who are focused on larger urban centers.

We think Landcadia (LCA), via its SPAC merger with Waitr, is the least expensive way to play to nasent and burgeoning shift to online restaurant delivery, with growth that should exceed what management has told the street. For now, due to it being a SPAC, Landcadia is not well known by the street, creating a compelling entry point for what will be a $500mn+ market cap company.

We believe Landcadia, which should complete its SPAC merger with Waitr during the 1^st or 2^nd week of November, represents a compelling, under the radar screen, opportunity for growth investors playing the offline to online restaurant delivery trend. We see 50%-100% upside to shares over the next 6-12 months. For those with a less bullish stance on the sector, valuations, or macro/broader economic concerns, we recommend a pair trade with far slower-growth (although high-growth), more highly valued, GrubHub (GRUB) which has both low short-interest and a low borrow-rate. Catalysts include: closing of the SPAC merger in 1H November, 2018 guidance raise when company reports 3Q, sell-side coverage, and tender or warrant (LCAHW) exchange soon after transaction close.

The trend from offline to online has been relentless since the advent of the internet and mobile technology. We’ve seen it in shopping with Amazon (AMZN) and Alibaba (BABA), digital media with Facebook (FB), Google (GOOG), Netflix (NFLX), and Spotify (SPOT), Hospitality with Expedia (EXPE), Priceline (PCLN) and Airbnb (AIRB), and transportation with Lyft (LYFT) and Uber (UBER). Surprisingly, in the US, the trend towards online restaurant delivery is well behind these other industries, and relatively nascent at just 6% of off-premise restaurant revenue. Specifically, only 6% of off-premise dining (delivery, take out, drive-through) ordering is done via online technology. Given its anticipated unabated high growth, market leader GrubHub has

Analyst’s Disclosure: I am/we are long LCA, LCAHW, IEA, IEAWW, NRCG, NRCG.WS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.