Interactive Investor

Just Eat orders grow, but share price keeps shrinking

15th July 2021 09:11

Keith Bowman from interactive investor

This food delivery company now includes US business Grubhub. We take a look at this latest update.

First-half trading update

  • Orders up 61% or 51% when including Grubhub
  • Gross transaction value of €14.1 billion

“Unsurprisingly, and with Covid restrictions persisting across Just Eat (LSE:JET) various national markets, these are strong numbers. 

Half-year orders are up by 61%, or by 51% when allowing for the inclusion of the US business Grubhub. Delivery order growth in the UK came in at 733% over the first half of 2021 compared with the same period in 2020. Full-year 2021 orders for Just Eat and excluding Grubhub have been upgraded to more than 45% from a prior estimate of more than 42%.

Gross transaction value for the full year between both arms of the company is expected to be somewhere between €28 to €30 billion. Significantly, adjusted EBITDA losses are expected to have peaked, with a trend back to profitability expected. 

In all, and on the downside, intense competition and ongoing required investment spend continue to offer headwinds. Full clarity on Grubhub and the degree of investment required provides a key investor concern. Just Eat shares are down around 27% (as of close 14 July) since announcing the Grubhub deal back in June 2020 compared to a gain of almost 12% for the wider FTSE 100 index. Worries for slowing growth as Covid restrictions ease also play into the mix.   

But a coming together with and Grubhub creates a food delivery company truly on the global stage. Partnerships with the likes of McDonald's (NYSE:MCD) and Greggs (LSE:GRG) in the UK are enticing customers. And the current emphasis on investment over profits appears to be playing the long-term game. For now, and despite reasons for caution, a consensus analyst target price of almost £97 per share leaves market opinion pointing to a 'buy'.

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