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Uber and Deliveroo Tie up Potential Hits Just Eat

Tue, 11th Dec 2018

Analysts are now wary of Just Eat’s prospects as rumors have surfaced about the potential for a tie up between Uber and Deliveroo. Peel Hunt, a firm which has been a strong believer in the potential of Just Eat over the last five years, believes that the potential merger could eventually lead to the demise of the company.

The previously enthusiastic broker has downgraded its recommendations for the stock from Buy to Sell, and slashed forecasts for the company’s 2018 revenue from £756 million down to £717 million, with earnings predictions also falling.

The broker’s note was sparked by speculation, which has been ongoing for over a month, that Uber is in talks to purchase Deliveroo. This move would put a lot of pressure on other companies in the market. Deliveroo has pushed back any plans for an IPO, but there could still be one on the horizon.

Just Eat currently has around one third of the market share of the UK’s food delivery industry, and the company is perhaps the most vulnerable to any impact from a merger. It is described as having a ‘quasi-monopolist margin’ and it would be vulnerable to any encroachment from a competitor that had a strong focus on delivery. The company has been struggling to head off competition from Uber and Deliveroo already, and stepped up its investment in the UK by beginning to deliver more meals itself instead of relying on third parties, as an initiative to tempt customers back to their service.

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