17th Jan 2020 13:15
(Alliance News) - RBC Capital Markets downgraded Just Eat PLC rating to Outperform from Top Pick following the approval of Just Eat and the European online food food delivery marketplace Takeaway.com NV combination.
RBC, however, believes that Just Eat is "well placed because of its dominant market positions and high customer loyalty."
The bank said it revenue estimates for Just Eat for 2019-2020 remains "largely unchanged", meanwhile adjusted earnings before interest, tax, depreciation and amortization for 2020 falls 5% due to higher investments in Europe related to the roll-out of own delivery system.
RBC expects revenue for 2019 to be GBP1.02 billion, at the lower end of management's guidance of GBP1.0 billion - GBP1.1 billion, "as the acceleration in the UK order growth did not materialize in the third quarter as previously expected."
It expects underlying earnings before interest, tax, depreciation and amortization of GBP186 million, also at the low end of guided range of GBP185 million - GBP205 million.
"The primary change we make to out unit economic model (which drives our long-term forecast) is raising our expectations for own delivery penetration from 50% to 60% because of the evident increasing demand from customers for restaurant chains," RBC noted.
Also, RBC expects Just East to invest in own delivery in Europe to fuel growth.
"While this raises our revenue estimates, our terminal earnings before interest and taxes is broadly unchanged, reflecting the lower margin of own delivery," RBC said.
RBC increased Just Eat's price target to 1,030 pence from 810p, driven by combined discounted cash flow for Just Eat and Takeaway.com.
Just Eat shares were down 0.1% in London at 881.00p each on Friday.
By Loreta Juodagalvyte; [email protected]
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