Interactive Investor

ii view: Just Eat shares soar on Amazon deal

6th July 2022 11:38

Keith Bowman from interactive investor

Shares for this food delivery giant are down significantly over 2022, but have rallied today. We assess prospects. 

US Product launch

Chief executive of Grubhub, Adam DeWitt, said:

"I am incredibly excited to announce this collaboration with Amazon that will help Grubhub continue to deliver on our long-standing mission to connect more diners with local restaurants. Amazon has redefined convenience with Prime and we're confident this offering will expose many new diners to the value of Grubhub+ while driving more business to our restaurant partners and drivers."

ii round-up:

Online food ordering company Just Eat NV (LSE:JET) today detailed a product partnership between its US Grubhub business and retailing mammoth Amazon (NASDAQ:AMZN) in the US.

US Amazon Prime members can now sign up for a free, one-year Grubhub+ membership and receive unlimited no fee deliveries on eligible orders from an array of US restaurants. 

Under the deal, which automatically renews each year unless terminated by either party, Amazon will receive warrants over 2% of Grubhub's fully-diluted common equity.

Just Eat shares rose by more than 15% in UK trading having come into this latest announcement down by more than 70% year-to-date. Shares for rival Deliveroo (LSE:ROO) are down by around 55% during 2022, while the FTSE All World index has fallen by around a fifth. 

Just Eat also confirmed that it continues to explore the partial or full sale of Grubhub having launched a deal to buy Grubhub back in 2020 for just under £6 billion. Just Eat management has come under pressure from shareholders to potentially sell Grubhub as its operations in the US face fierce competition. 

Under terms of the deal, Amazon will also receive warrants on a further 13% of Grubhub's fully-diluted common equity. Warrants give the right to buy shares at a certain price and up to a given date. The exercise of the warrants, or buying of shares by Amazon, is subject to the satisfaction of certain performance conditions, mainly the number of new consumers delivered through the partnership agreement.

The deal is expected to increase membership of Grubhub+, while having a neutral impact on Grubhub's 2022 earnings and cash flow. It is expected to be earnings and cash flow accretive for Grubhub from 2023 onwards.

At the end of June, broker Morgan Stanley reiterated its positive stance towards Just Eat shares, giving a £28 fair value share price estimate and believing that half-year results on 3 August could possibly surprise to the upside. Although sales are likely to be weak according to the broker, the profit margin outlook could prove favourable.

ii view:

Early in 2020, Just Eat and Dutch company combined. In June 2020, months into the global pandemic, it launched a deal to buy US business Grubhub. The now international Just Eat business generates most of its revenues from commissions charged to restaurants on the value of orders placed through its platforms. It mainly collaborates with delivery restaurants, but also provides its delivery services to restaurants that do not deliver themselves. 

For investors, its timing in buying Grubhub and against the backdrop of the Covid crisis, may have proved ill-judged. Intense competition continues to bear down on fees, while increased costs and ongoing investment drag on profitability. A loss of over €1 billion was reported for 2021. The company currently pays no dividend and, like other delivery companies such as Ocado (LSE:OCDO), there has been some unwinding from bumper sales during the pandemic. 

On the upside, its geographical footprint is now significant, including the UK, Germany and France. Some areas of business which have proved harder to turn profitable have been exited such as Norway and Portugal. Costs generally remain a strong focus. On balance, and while some caution looks sensible given cost headwinds and economic uncertainty, Just Eat looks to have established itself as a major player in an industry which is likely here to stay. 


  • Diverse geographical markets
  • Investing for growth


  • Intense competition
  • A pre-tax loss made for 2021

The average rating of stock market analysts:


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