Investors Hungry for GrubHub

Online food ordering service delivers big the first day of trading.
3:00 | 04/04/14

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Transcript for Investors Hungry for GrubHub
I'm -- company -- has a financial markets coming to a close on this Friday April 4. And the stock with a great store today rob hub. Investor is indeed hungry to get on board -- the on -- for delivery company began its first day of trading today. So every regular from Yahoo! finance is -- those over the all the details -- happy Friday to use -- -- So are those of us who are not today with -- their business model what is it. I've grown as a company that it's an online ordering service for tons of local restaurants they they operate about 600 cities basically they make deals with local restaurants. You go to their website you can either search. That website by the cut the figure interest and in the -- by the restaurant -- you just place your order on line it's very simple and straightforward for the consumer. And then you can either pick up your fair haven't delivered so basically you're placing an order on line instead of doing it by found. Which obviously appeals to people who love using their screens. You know I'm in people like my teenage kids who don't even make phone calls anymore -- -- -- that. It's a pretty good it's a good idea -- -- well executed it simple for consumers. And it seems to -- an enduring. Business model this company by the way is profitable something we don't always say about -- companies as they're coming to mark. And then that's very that it often times the concept seem very great on paper but in fact at the end of the day it's about showing them the money was take a look at before and after. Last night before today's first day of trading. Growing up priced its initial public offering at seven million shares 26 bucks a share. So essentially what happened -- stock today -- It shot up it went as high as forty box. Somebody made a lot of money if they were sold significant numbers of shares at forty they bought a 26 it settled back down around 34 dollars today. That's still a nice that's more than -- 30% gain and what that tells you is. Just good appetite I was gonna try to actually avoid eating -- cheered and sorry about that but darn good that -- investors had a good appetite for this stock. I think that's because they. They think this business has legs it's gonna stick around they don't think this is a sort of one trick pony like we saw with -- we saw -- some. The company that makes candy crash for instance that IPO -- -- -- -- with the stock falling largely because people think well. They just have one popular thing in its trendy and Natalie might might go out of favor sometimes and so investors think that this company is gonna stick around and -- -- Yeah those king digital entertainment the makers of candy -- -- -- -- -- everyone had a lot of with enthusiasm for it. And I think oftentimes there is that disconnect right between actual product -- itself everyone loves candy crush on lot of I don't use -- -- -- thing. Rick I don't know about you -- you -- candy crusher. I don't have time I -- And pigs were too busy wondering does were too -- order and -- that's we have no time for this but the fact is is that you look at their product that may be popular in the marketplace but when it comes to actually lure -- investors. There can there can be that that disruption. Right and if you're an investor you're thinking yourself why don't I want to get in on the hype and even if it is a -- lot of investors -- say investors say. Well I want to get in on the bubble wallets inflating as long as I can get out before it -- so that's one of the things that -- interest in these trendy stocks. But you know there are other investor saying I just. I just don't see any there there and what happens when this one you know it's one product becomes unpopular so with -- -- they don't really have that problem -- Our integrated into. Into the restaurant scene and in a lot of cities. -- you know it's a product that it's okay for the restaurant is a Mike it -- they might get new orders they pay a small fee but they might be getting new customers and consumers pay. No fee and they get a different type of service which a lot of people will I think is better so that makes it just good a good idea. Well executed and it seems like it's right for the times. Is that part of the appeal to grow other factors that there's a relatively small number of competitors out there I mean I within -- them until the cut both ways well pardon that -- In the fact that if investors are looking at something that is relatively limited is what our hot what are options out there there's not a whole lot to gauge success on right. While growth of actually merged. Recently with another company -- the same thing called seamless send somebody made the new grub -- Sort of the biggest player in this market I think that's what investors like. And I know this company had -- it has all it. It has the right feel it has the right vibe like they gave -- -- successful promotions on snapped chat for instance. So I think that tells investors that this company knows how to talk to younger people and that's. You know if you could reach younger people -- -- obviously building a great consumer base for the future and I. I think that that has a lot to do that these are people who will keep using this service and won't necessarily get tired of it because you believe people are gonna order out and it's not like you're gonna get tired of using this the way you -- with -- -- with a digital game so that gives it look what looks like a good future. At what a different story as opposed to something like Groupon which got actually killed because of other competitors right like no one king's way. -- a lot of other of those luxury service -- or any of those kinds of you know group discount buying programs that really kind of came in and and and sort of almost put Groupon investors in their places. -- -- -- but the Groupon model was easy to copy. And I think others what could potentially -- the they are copying the grub hub model but I think with -- you had a situation where the merchants who were basically. Giving the discounts. That consumers get. And not all them think that -- Groupon is a great deal there they sometimes end up giving stuff away at a loss. I'm selling at a loss and exposed to get more from floor traffic is supposed to be what they get into returning have a lot of -- merchants kind of questioning that. So in this case it's not clear that merchants really love it. I think with the grove but I think I think this these are much smaller for the for the restaurants. And they're gonna have just get more orders by definition if if people can find them more easily on the Internet as well as the old ways by calling in an order which you can still do of course. That seem to be a good thing for the restaurant and by the way if your competitors are now doing online ordering you pretty much have no choice you have to do -- -- -- keep keep such a keynote address the competition -- -- -- so the last and I not to not to dispense with any kind of specific stock buying advice. But for those that do you wanna get onto this kind of action -- -- -- is today's the IPO -- was that it was that the one hit or shall we be looking for continued growth and -- -- -- next. Of months. Well this -- the stock is now up I mean it's always hard to guess them it and it's hard to guess the value of any company especially. New issues you know -- prudent investor should probably stay away from all IPO stocks because they're very volatile. They can go up by a lot but they can also go down by a lot which which -- with some of them you know FaceBook was one of them is now one of the most important tech companies out there but its stock -- for. Almost a year after its ipso. It's it's very risky play these things if you want to play them just refiners and get a little -- -- upside look for ones that you might think. Are a little bit undervalued where where maybe they. They didn't do as well as scrub -- did and its first day. But looks like there's a long term business plan I'd be part probably be wary of -- -- given that it just had such a pop on its first day. Will be keeping an eye on -- how Britain -- from Yahoo! finance Rick go to those spicy spring rolls from -- -- this -- and have a good ones there. Thanks dances are even watch the story stock right here on abcnews.com. I'm Dan Cutler and New York.

This transcript has been automatically generated and may not be 100% accurate.

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