New York CNN Business  — 

Competition is brutal in the food delivery wars, and now it is taking a severe toll on one of the pioneers in the business.

Shares of GrubHub (GRUB) plunged more than 40% Tuesday, to their lowest level since March 2017, after the company announced late Monday that its earnings and sales missed Wall Street’s forecasts. The company, which also owns food delivery service Seamless, lowered its outlook as well.

GrubHub is finding it tougher to keep customers now that so many other companies offer quick delivery of their favorite takeout dishes. Uber (UBER) has the popular Uber (UBER) Eats service. Privately held DoorDash and Postmates are also major rivals.

Although Amazon (AMZN) recently pulled the plug on its Amazon (AMZN) Restaurants delivery service in the US earlier this year, the company is still a leading player in the grocery delivery business and also has a stake in UK-based food delivery startup Deliveroo.

“With billions being poured into awareness campaigns, diner incentives, driver incentives and restaurant incentives, it makes sense that easy-to-access ‘analog’ diners would quickly become aware of the substantial benefits of online ordering,” said GrubHub CEO Matthew Maloney and president and CFO Adam DeWitt in a letter to shareholders.

“As a result, the easy wins in the market are disappearing a little more quickly than we thought,” the executives added.

‘Promiscuous’ customers are hurting GrubHub

GrubHub’s biggest problem may be the fickleness of its customers, who are more than happy to try multiple delivery services. There is no brand loyalty — only price matters — and that’s led GrubHub to increasingly rely on discounts and free delivery promotions to keep customers coming back. That may help revenue, but it destroys profitability.

“We believe online diners are becoming more promiscuous,” Maloney and DeWitt said in the letter to GrubHub shareholders.

The executives added that additional free delivery and promotional support for some of their top national restaurant partners, including McDonald’s (MCD), Panera Bread and Yum! Brands (YUM)-owned KFC and Taco Bell, was another reason GrubHub had to reduce its outlook.

Analysts were merciless Tuesday morning, with several slashing their price targets and ratings on the stock because of worries about such a competitive environment.

Oppenheimer’s Jason Helfstein cut his target on GrubHub from $91 a share to $34 in a report titled “Too Many Cooks in the Kitchen.” Brent Thill of Jefferies said in a report that “we view food delivery as a challenging industry to truly differentiate” from the rest of the competition.

A price war that nobody can win

Other analysts were perplexed about GrubHub’s decision to try to engage in a price war with deeper-pocketed rivals, such as Uber.

“The food delivery market is increasingly irrational as competitors flood the market with rewards and incentives, making online diners less loyal,” said Bank of America Merrill Lynch’s Nat Schindler in a report.

Schindler added that GrubHub’s “answer to this irrationality … seems confusing: its management letter seems to suggest that it will double down on its competitors’ poor economic decisions” and embrace free delivery for the big fast food and quick-service restaurant chains.

Guggenheim Securities analyst Matthew DiFrisco described the letter to shareholders as a “Dear John” breakup note to growth investors.

“New diners in newer markets are less loyal and purchase at lower frequencies than older cohorts. Most concerning is that the new strategic plan is unproven, creating greater uncertainty,” he said.

“Hindsight is 20/20, but we believe management should have forecasted that entering a market with larger incumbent delivery providers with greater restaurant inventory and driver networks would be a meaningful headwind,” DiFrisco added.

More M&A on the menu?

More consolidation may be needed in the industry to shake out some of the weaker hands. DoorDash recently bought the Caviar delivery business from Square (SQ), for example. And GrubHub bought Eat24 in late 2017 from Yelp (YELP)— only to shut the brand down less than a year later.

Maloney, GrubHub’s CEO, conceded during a conference call with analysts Tuesday morning that the major food delivery companies may all be in a no-win situation if things don’t change.

“Many of our competitors are private companies that are raising money right now,” he said. “And so we’re talking to the same investors that they are, and we’re hearing their stories that they are not growing as fast by any stretch.”

In an industry with few barriers to entry, being among the first is no guarantee of long-term success.

In some respects, GrubHub is starting to look a lot like Blue Apron (APRN), a pioneer in the meal kit business. Its stock has plunged 69% since February now that so many rival meal kit services have cropped up.