A Deliveroo cyclist pauses at a street corner in the Northern Quarter of central Manchester, on Apr. 12, 2021 as coronavirus restrictions are eased across England.
AFP via Getty ImagesInvestors have not exactly embraced U.K. online food-delivery service Deliveroo, since its less-than-stellar London debut in late March.
Since that initial public offering that saw shares fall 30% on the day, the stock has failed to get even anywhere near the listing price of 390 pence, last trading at 249 pence on Tuesday. Initiating coverage on Deliveroo in a fresh note to clients, analysts at Citigroup were keeping expectations on an even keel, with a neutral rating and a price target of 285 pence.
“Deliveroo operates in an attractive industry,” with a big total addressable market of more than 1.2 trillion across food services and grocery and low online penetration,” said a team of analysts led by Catherine O’Neill.
“We see Deliveroo as well capitalized (post IPO) with a solid track record of execution, and 2021E GTV [gross transaction value] guidance has been de-risked. However the path to scale and #1 is not easy as it faces rising competitive intensity in its main markets and uncertainty over regulation,” said the analysts.
Neither has the going been as easy for rivals such as the Amazon -backed company Just Eat Takeaway, whose shares are down about 15% year to date. Citi analysts said Deliveroo is trading toward the lower end of its European peers, which is a fair reflection of risk reward.
In its first post-IPO earnings last month, Deliveroo said it doubled order numbers during the first three months of the year, due to Covid-19 restrictions for restaurants. But the company warned that it expects growth to decelerate as rules loosen up amid Covid-19 vaccinations. Analysts remain worried about competition from rivals that also include Uber Technologies’ Uber Eats.
Citi said its proprietary analysis shows the company has a few things in its favor, such as No. 1 market-share positions in both London and Paris, which “suggest strong execution and a well-established playbook to rollout.” The analysts also noted “decent momentum” in several markets, though not a top position in those.
Deliveroo is targeting 30% to 40% GTV growth for 2021 and 20% to 25% over the medium term, with a gross margin target over that time frame of more than 8.5%, noted the analysts. They expect it to reach adjusted Ebitda (earnings before interest, taxes, depreciation, and amortization), used to gauge operating performance, in 2023.
“However, there is considerable execution risk medium term, given the well-funded competitors and dynamic nature of the market,” said O’Neill and the team. Among the main ones, Deliveroo may not reach profitability, GTV/revenue could slow, and changing legislation related to rider employment status is also a possibility.
To turn more positive on the stock, the Citi analysts said they would need to see GTV growth momentum “sustain at a high level, signs of competition easing and more clarity” on those potential regulations for riders. Their bull case points to 445 pence. Shares could fall as low as 175 pence if the company experiences a sharper than expected slowdown in GTV growth that weighs on gross profit.
"easy" - Google News
May 11, 2021 at 10:02PM
https://ift.tt/3f7cIK4
Deliveroo's Path Isn't Easy, but Here's What Could Go Right, Says Citi - Barron's
"easy" - Google News
https://ift.tt/38z63U6
Shoes Man Tutorial
Pos News Update
Meme Update
Korean Entertainment News
Japan News Update
Bagikan Berita Ini
0 Response to "Deliveroo's Path Isn't Easy, but Here's What Could Go Right, Says Citi - Barron's"
Post a Comment