19th Jul 2022 14:37
(Alliance News) - Undeterred by a guidance cut, analysts at Berenberg backed Deliveroo PLC, saying on Tuesday it stands out against peer Just Eat Takeaway.com NV due to its somewhat defensive qualities.
The food delivery sector has struggled in recent months, as pandemic tailwinds unwind and as consumers cut down on takeaways due to cost of living pressures.
Deliveroo shares were 6.7% higher at 97.06 pence each in London on Tuesday afternoon, but the stock has lost roughly two-thirds over the past 12 months. Just Eat Takeaway was up 2.3% at 1,263.60p but is down 79% since July 2021.
This slide means the "risk/reward on the stock is now favourable", analysts at Berenberg said.
Deliveroo on Monday lowered annual gross transaction value growth guidance.
Total GTV climbed just 2% at constant currency in the second quarter of 2022, slowing markedly from 12% growth in the first quarter. For the whole of the first half, it grew 7%. GTV had more than doubled in the first half of 2021.
For the full year, Deliveroo expects GTV growth in the range of 4% to 12%, its guidance cut from a previous range of 15% to 25%.
Deliveroo affirmed margins guidance, however. It expects an adjusted earnings before interest, tax, depreciation and amortisation margin of between minus 1.5% and minus 1.8% for 2022, improved from 2.0% in 2021.
Following the outlook cut, consensus for Deliveroo's full-year outturn has fallen to more realistic levels, Berenberg said.
Sentiment towards the stock has weakened recently on concerns about falling consumer confidence and the tailing off of the sector's pandemic boost. Monday's guidance cut could draw a line under these fears.
"Investors have been concerned about these twin pressures on the food delivery stocks, and thus the reduction in guidance, while clearly not a positive, at least seeks to draw a new line in the sand as regards forecasts, and means that public expectations are catching up with what investors have for some time anticipated," Berenberg added.
In the UK, Berenberg believes a slowdown in consumer spending will hit Just Eat harder than Deliveroo.
"For we think that Deliveroo's customer base is more 'premium', reflecting that it is more London-centric. We note that JET saw a sequential decline in orders in Q1 2022 versus Q4 2021, while Deliveroo reported 1.5% growth. As well as a different customer profile, we note that Deliveroo has likely benefited from sequential growth in its grocery delivery activity and from geographic footprint expansion," Berenberg added.
"Deliveroo may be more defensive than Just Eat Takeaway.com."
Berenberg rates Deliveroo at 'buy', lifting its recommendation from 'hold'. However, it halved its price target on the stock to 140p from 295p.
By Eric Cunha; [email protected]
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