Delivery firms Just Eat & Deliveroo look for a new catalyst for their share prices

​​​Delivery firms Just Eat & Deliveroo look for a new catalyst for their share prices

​Just Eat Takeaway.com's shares have experienced a significant decline since its initial public offering (IPO). However, the company's share repurchase plan has instilled confidence that it is on track to achieve positive cash flow in the first half of the year. The company now expects to reach a near break-even position by the end of the year. This is primarily due to net interest income and lower capital spending.

​The company has made progress in the UK and Northern Europe, aided by its commitment to maintaining low delivery fees. Additionally, a return to seasonal ordering habits and inflationary factors have contributed to the growth of gross transaction value (GTV) in the third quarter (Q3), excluding the negative impact from the US market.

​Attempts to improve pricing, exercise cost discipline, and achieve efficiencies through platform consolidation have helped offset investments aimed at fending off competitors and expanding into the grocery sector. However, current estimates do not indicate positive adjusted earnings per share (EPS) before 2026, according to Eikon data.

​Can Deliveroo shares maintain their upward trajectory?

​Despite a sharp decline from its IPO, Deliveroo has seen a rise in its performance over the past year. The company's guidance for weak GTV growth in 2023, as well as its adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) target, match market expectations. However, there are still concerns about demand risks.

​On a positive note, Deliveroo has experienced a 9% GTV increase in the UK at constant currency, surpassing estimates and outperforming its local competitor, Just Eat Takeaway.com. This indicates that Deliveroo's core clients have remained despite higher fees and partner price hikes. A focus on cost efficiencies should help improve its cash position.

​While there has been a slight decline in the capture rate, which limits sales growth, the improvement in order losses is encouraging. Deliveroo's performance in France has shown positive trends, especially after the withdrawal of Just Wat. However, the international unit could continue to pose challenges in terms of competition in Europe and Asia.

​Analyst ratings for Just Eat Takeaway.com and Deliveroo

​Refinitiv data shows a consensus analyst rating of between ‘buy’ and ‘hold’ for Just Eat Takeaway.com with 2 buy, 7 hold and 2 sell recommendations – and a mean of estimates suggesting a long-term price target EUR 20.94 for the share, roughly 58% higher than the current price (as of 15 January 2024).

​For Deliveroo the picture is similar in that is rating also sits between ‘buy’ and ‘hold’ with 2 strong buy, 4 buy, 7 hold and 1 sell recommendation – and a mean of estimates suggesting a long-term price target 153 pence for the share, roughly 20% higher than the current price (as of 15 January 2024).

​Technical outlook on the Just Eat Takeaway.com and Deliveroo’s share prices

​Just Eat Takeaway.com’s share price has been sliding from its January 2023 peak at EUR 27.895, by around 52%, with a retest of the July 2022 low at EUR 13.10 being on the cards.

​Just Eat Takeaway.com Weekly Candlestick Chart

​Further down lies significant support between the October 2022 and June 2023 lows at EUR 12.18 to EUR 12.13.

​Immediate downside pressure should prevail while the Just Eat Takeaway.com share price stays below last week’s EUR 14.904 high. The medium-term downtrend will remain valid as long as the next higher December peak at EUR 15.844 isn’t overcome.

​The technical picture has been more promising for the Deliveroo share price which has been trading in an uptrend since the end of March 2023.

​But even the Deliveroo share price topped out at its 149.4 pence November peak and has been trading in a sideways trading range since mid-December.

​Deliveroo Daily Candlestick Chart

​While the Deliveroo share price remains above its late-December 121.8p low on a daily chart closing basis, a continuation of the medium-term uptrend remains likely. For this to happen, a rise and daily chart close above the current January high at 133.2p would need to occur, though.

​Failure at 121.8p would lead to a fall through the April-to-January uptrend line and a probable retest of the May high and October low at 116.9p to 115.6p. Further down important support can be spotted between the July and September lows at 107.4p to 106.1p.