Can Just Eat shares deliver a post-earnings bounce?

Like other food delivery companies, Just Eat has seen its share price slump dramatically this year as the pandemic boost to demand wares off. After working hard to pare back operating and delivery costs, however, it’s forecast to go into profit as Q3 earnings land.

Netherlands-based food delivery company Just Eat Takeaway.com [JET.L] is about to deliver its earnings for the third quarter on Wednesday 18 October – and signs look more positive for its share price, which has struggled in 2022.

In late September, Just Eat announced that it expected positive earnings for 2022 that would make the company profitable again after two years in the doldrums. It said lower overheads and costs per delivery were driving growth, as it strived to keep operating costs down, giving reason to expect profits into 2023.

The share price of the Dutch-owned company, which acts as an online intermediary for local restaurants and takeaway services, rose by 10.8% to 1,433.40p by the close of 27 September, the day of the announcement.

However, the Just Eat share price still has a long way to go to recover from recent falls. Year-to-date, the stock is down 69.8% to the close on 17 October, inching up again after having reached a new 52-week low of 1,111.60p on the prior trading day.

Revenue up for H1, but orders down

Just Eat’s forecast for its Q3 results, if realised, would be an improvement compared with its adjusted Ebitda loss of €134m in the first six months of this year, which it announced at its H1 2022 results in August. While year-over-year, this was an improvement of 29% from H1 2021, the company will no doubt be hoping it can emerge with a profit in its upcoming results.

Just Eat’s total order numbers were down 7% year-over-year for H1, but its total revenue, less order fulfilment costs, was up year-over-year by 7% to €2.8bn. In its August results, the company estimated that its gross transaction value (GTV) would grow by mid-single-digits year-over-year for FY2022.

The last time the company was in profit was 2020, when it saw total profits of €363m, but this had switched to an adjusted loss of €350m by 2021. 

Just Eat isn’t alone in this trend, however. While many food delivery firms saw growth during the pandemic, sales slumped as lockdowns ended. One of the company’s rivals, Delivery Hero [DHER.DE], enjoyed a brief rally in August, however, as they found new ways to cut costs and streamline business.

Move to profit but at a cost

Last August, as part of Just Eat’s focus on moving to profit, the company sold off its stake in Latin American joint venture iFood to tech investor Prosus. The deal was priced at €1.8bn and was designed to boost its cash flow as well as take the pressure off its wobbling balance sheet.

But the company has had other woes this year. In the same month of the sale, Just Eat wrote down the value of US acquisition GrubHub to €3bn, after paying $7.3bn for it last year. It now plans to offload the subsidiary. CEO Jorg Gorbig was also laid off after investigations into bad behaviour at a work event, though in August he was reinstated.

Analyst rate Just Eat a ‘hold’

The biggest question is whether cash-strapped consumers can afford, or even wish, to continue indulging takeaway habits formed during the pandemic. Earlier this month, analysts at JPMorgan Chase recently downgraded Just Eat stock to ‘underweight’, and reduced their price target to 1,312p down from 1,568p.

This comes on the heels of Credit Suisse analysts lowering their price target on Just Eat stock from 3,900p to 3,300p in late September, while retaining an ‘outperform’ (or ‘moderate buy’) rating. 

At MarketBeat, four analysts offering a consensus on Just Eat shares are offering a ‘hold’ recommendation, and a median 12-month price target of 2,512.75p, which would be a 104% rise on its last close of 1,232p.