Epic Showdown: Delivery Hero Surges with 60% Upside in Winner-Takes-All Battle Against Just Eat, Declares Stifel!
In the fiercely competitive online food delivery sector, Berlin-based Delivery Hero and Dutch multinational Just Eat Takeaway have witnessed significant transformations. Investment bank Stifel analyzed their stocks and identified a substantial upside for Delivery Hero amidst this “winner-takes-all” market. Both companies trade shares across the U.S. and Europe. Over the past decade, the industry experienced dramatic change, with companies employing a strategy known as “Blitzscaling” to achieve dominance. This approach led to impressive revenue growth, with Delivery Hero and Just Eat Takeaway recording compound annual growth rates of 38% and 17%, respectively, from 2019 to 2023. However, this came at a cost: Delivery Hero accumulated net losses of 9.6 billion euros, while Just Eat Takeaway faced 7.1 billion euros in losses.
The pandemic initially boosted these services, but growth decelerated with the reopening of restaurants, the return to office settings, and a cost-of-living crisis. This slowdown, coupled with rising interest rates and competition from global players like Uber and DoorDash, pressured sector profitability. To counter this, both companies shifted focus to profitability and cash flow generation, showing improvements in adjusted earnings in early 2024.
Stifel is particularly optimistic about Delivery Hero, assigning a “Buy” rating and a price target of 60 euros, indicating a potential 60% upside. The bank believes Delivery Hero’s pivot to profitability will reveal its business model’s value, anticipating an adjusted EBITDA margin of 2.8% and a free cash flow yield of approximately 6% by fiscal year 2026. The announcement to list Middle Eastern subsidiaries on the Dubai Financial Market by late 2024 has bolstered positive market sentiments. Conversely, Just Eat Takeaway has a “Hold” rating with a 17% upside potential. Despite improved performance in Northern Europe and the UK, its slower growth rate justifies a lower stock premium. Analysts caution about intense competition affecting margins and free cash flow generation.
Original Story https://www.cnbc.com/2024/10/15/delivery-hero-vs-just-eat-one-has-60percent-upside-in-a-winner-takes-all-market-says-stifel.html
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