Director dealings are essentially insider transactions for shares between directors and the companies they work for. These dealings are always made public, and are often considered a good indicator of a company’s future prospects. However, they don’t get nearly as much attention as other company news due to their complex nature. Nonetheless, here I’m breaking down this week’s biggest director dealings from three FTSE firms.

Vodafone

Vodafone (LSE:VOD) is a British multinational telecommunications company. It predominantly operates services in Asia, Africa, Europe, and Oceania. The company runs at least some form of operations in over 150 countries.

Following lacklustre numbers from its Q1 trading update, the share price dropped by 5%. It has stayed there since. Despite that though, it’s a sign of confidence when a high-ranking director purchases shares. And this week, Vodafone’s Chairman decided to reinvest his dividends into buying more Vodafone shares.

• Name: Jean-François van Boxmeer
• Position of director: Chairman
• Nature of transaction: Dividend shares
• Date of transaction: 10 August 2022
• Amount bought: 9,975 @ £1.21
• Total value: £12,069.75

Deliveroo

Deliveroo (LSE: ROO) is a British online food delivery company. It operates in over 200 locations across the UK, and is the second-biggest food delivery platform in the country. It also operates internationally with operations in France, Singapore, Australia, and many more.

In this week’s transaction, a director exercised his option to redeem stock compensation. Following this, he opted to sell approximately half of the shares received to cover tax liabilities. That being said, it’s worth noting that this is a monthly occurrence from the company’s CFO. As such, these actions shouldn’t impact investor sentiment surrounding the stock. It’s worth pointing out, however, that the sale of these shares dilute shareholders’ value. This is because there are now more Deliveroo shares floating on the market.

• Name: Adam Miller
• Position of director: Chief Financial Officer
• Nature of transaction: Award shares
• Date of transaction: 15 August 2022
• Amount vested: 83,400 @ £0.96
• Total value: £80,247.48

• Name: Adam Miller
• Position of director: Chief Financial Officer
• Nature of transaction: Sales of shares to cover tax liabilities
• Date of transaction: 15 August 2022
• Amount sold: 40,402 @ £0.95
• Total value: £38,381.90

FirstGroup

FirstGroup (LSE: FGP) is a British multi-national transport group. The FTSE 250 firm is the leading transport operator in the UK and North America. It is widely known for being a provider of public transport, especially buses in the UK.

Rather surprisingly, its shares have managed to outperform the wider UK market index this year. But after the share price took an 11% hit last week, a couple of large director dealings were carried out. The first involves a non-executive director purchasing a substantial number of shares. But what really caught my eye were the conditional share awards that could be awarded to FirstGroup’s CEO and CFO. This should shore up investors’ confidence in the stock, as the group’s management will have to perform and meet investors’ expectations in order for these award shares to vest.

• Name: Sally Cabrini
• Position of director: Non-Executive Director
• Nature of transaction: Purchase of shares
• Date of transaction: 17 August 2022
• Amount vested: 10,000 @ £1.15
• Total value: £11,482

• Name: Graham Sutherland
• Position of director: Chief Executive Officer
• Nature of transaction: Award shares
• Date of transaction: 18 August 2022
• Amount vested: 972,590 @ Nil
• Total value: N/A

• Name: Ryan Mangold
• Position of director: Chief Financial Officer
• Nature of transaction: Award shares
• Date of transaction: 18 August 2022
• Amount vested: 1,003,226 @ Nil
• Total value: N/A

Types of Shares

To provide context, there are a few types of shares that can be purchased by directors. Some directors opt to purchase shares via the open market. Having said that, directors also have the option to purchase and receive shares via a share incentive plan (SIP).

A SIP is an employee plan for companies within the UK to flexibly award shares to employees. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

In this week’s set of director dealings, a few types of SIPs were exercised. For starters, Vodafone’s Chairman opted to purchase more Vodafone shares from the dividends he received from his current shares.

On the other hand, Deliveroo’s CFO decided to exercise the option of redeeming his restricted stock units. These are a form of award shares which allow for directors to redeem shares at a later date, as either as part of their salary or based on meeting performance obligations.

FirstGroup’s CEO and CFO were awarded shares as well, but these will only be vested once performance targets are met. In this case, more than 1.5m shares are up for grabs between the two directors under the operator’s long-term incentive plan (LTIP). The LTIP award will normally vest on the third anniversary of the date of award, subject to satisfaction of performance conditions and continued employment. The award is also subject to an additional holding period of two years from the date on which the award vests.

The post Director dealings: Vodafone, Deliveroo, FirstGroup appeared first on The Twelfth Magpie.

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John Choong has no position in any of the shares mentioned. The Motley Fool UK has recommended Deliveroo Holdings Plc and Vodafone. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Since its IPO back in March 2021, the Deliveroo (LSE: ROO) share price has been on some journey. After initially tanking, the stock saw its price surge as pandemic restrictions saw locked-down consumers taking full advantage of its services. At times, Deliveroo stock has flirted with the 400p mark.

However, a Covid hangover has seen it once again suffer. In the last 12 months, Deliveroo has fallen a massive 75%. This year alone it’s down 53%.

So, could it possibly fall some more? Or would picking up Deliveroo shares now be a smart move?

Half-year updates

Late July saw the business update investors with its second-quarter trading performance. While the group saw a small growth in gross transaction value (GTV), headlines were stolen by the decision to downgrade its full-year GTV growth outlook from between 15% and 25%, to somewhere closer to the 4% to 12% range. With the firm pinning this to “a more cautious economic outlook,” given the way 2022 has played out, this isn’t a surprise.

More recently, Deliveroo provided shareholders with its performance for the first six months of the year, in which it warned of rising pressures from the higher cost of living. While revenues were up 12%, losses before tax grew to £147m, up from just £95m the year prior. Its adjusted EBITDA also sat at a loss of £68m, a large rise from the £26m seen in H1 2021. With that said, this figure had been trimmed compared to H2 2021.

Where next?

After this, what’s next for Deliveroo?

Its most pressing issue is inflation. While this has pushed up staff costs, the cost-of-living crisis has also seen consumers tighten their belts as they cut back on takeaways. With inflation expected to peak at 13% this year, the second half of 2022 could only see further cutbacks on the part of customers.

What also worries me about the business is its inability to turn a profit. Despite a booming 2021, it still posted losses of £300m. Although it’s confident in its EBITDA margin guidance, along with stating that its balance sheet “remains strong,” this is obviously a concern.

One area that provides me with hope is the partnerships that the firm managed to strike. This includes the likes of McDonald’s and WHSmith.

More recently, it also announced a new relationship with Asda for the rapid delivery of groceries. With the deal in place for 15 stores, there are plans to expand the partnership to 300 Asda stores by the end of the year. The hopeful rise in business from deals like these should help Deliveroo offset rising costs.

Would I buy?

So, has the Deliveroo share price bottomed? And should I buy?

The business has shown glimmers of its potential over the last few years. But I won’t be buying any shares today. I think Deliveroo will struggle further into the year as rising costs eat away at its bottom line. Its lack of profit is also of concern to me. Regardless of the drastic fall, I’ll be avoiding Deliveroo for now.

The post Down 75%, has the Deliveroo share price bottomed? appeared first on The Twelfth Magpie.

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Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Deliveroo Holdings Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Director dealings are essentially insider transactions for shares between directors and the companies they work for. These dealings are always made public, and are often considered a good indicator of a company’s future prospects. However, they don’t get nearly as much attention as other company news due to their complex nature. Nonetheless, here I’m breaking down this week’s biggest director dealings from three FTSE firms.

Aviva

Aviva (LSE: AV) is a British multinational insurance company. It has millions of customers across its core markets. Aviva is also the UK’s largest general insurer. This week, an influential director purchased shares through the firm’s Global Matching Share Plan.

• Name: Jason Storah
• Position of director: Chief Executive Director
• Nature of transaction: Partnership shares and matching shares
• Date of transaction: 15 July 2022
• Amount bought: 38.413602 @ £3.93
• Amount received: 76.827204 @ £3.93
• Total value: £452.70

Royal Mail

Royal Mail (LSE: RMG) is Britain’s biggest postal service and courier company. The group runs the brands Royal Mail and GLS. It released its Q1 trading update this week. Two director dealings also occurred.

• Name: Mick Jeavons
• Position of director: Chief Financial Officer
• Nature of transaction: Free shares (Deferred Share Bonus Plan 2019)
• Date of transaction: 18 July 2022
• Amount bought: 14,132 @ nil
• Total value: £N/A

• Name: Katherine Amsden
• Position of director: PCA of Mark Amsden, Group General Counsel and Company Secretary
• Nature of transaction: Purchase of shares
• Date of transaction: 21 July 2022
• Amount bought: 34,262 @ £2.92
• Total value: £99,977.21

Deliveroo

Deliveroo (LSE: ROO) is a British online food delivery company. It operates in over 200 locations across the UK and internationally. In the UK, it is the second-biggest food delivery platform. In this week’s transaction, a director exercised their option to redeem stock compensation.

• Name: Adam Miller
• Position of director: Chief Financial Officer
• Nature of transaction: Free shares
• Date of transaction: 15 July 2022
• Amount received: 83,400 @ £0.85
• Total value: £70,973.40

• Name: Adam Miller
• Position of director: Chief Financial Officer
• Nature of transaction: Sales of shares to cover tax liabilities
• Date of transaction: 15 July 2022
• Amount sold: 40,407 @ £0.85
• Total value: £34,345.95

Types of shares in a SIP

To provide context, there are a few types of shares within a company’s share incentive plan (SIP). A SIP is an employee plan for companies within the UK to flexibly award equity to employees. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

In this week’s director dealings, Aviva’s CEO opted to purchase partnership shares. Partnership shares give employees the opportunity to buy shares via deductions from their salary, before tax deductions. But where partnership shares are offered, the company can also offer matching shares. This can range up to a maximum ratio of two free matching shares per partnership share purchased, as was the case. That being said, it’s important to note that matching shares must normally be held in a trust for at least three years, and held for five years in order to receive full tax relief. However, these shares may be forfeited if an employee withdraws their partnership shares from the trust.

On the other hand, the Royal Mail CFO received free shares. This occurred under the company’s Deferred Share Bonus Plan from 2019. Having said that, the director is expected to retain their share-based awards until they achieve an equivalent of 200% of their salary.

As for Deliveroo’s CFO, he received free shares. These are a form of restrictive stock units (RSU). RSUs are a form of stock compensation. It is a promise from the company to award a company’s shares in the future. RSUs are most often used in younger companies. This is because cash on its balance sheet is used to grow the business instead.

The post Director dealings: Aviva, Royal Mail, Deliveroo appeared first on The Twelfth Magpie.

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John Choong has no position in any of the shares mentioned. The Motley Fool UK has recommended Deliveroo Holdings Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The Deliveroo (LSE: ROO) share price has fallen off a cliff this year. Having said that, its latest trading update brought some much needed relief to its share price, boosting it by more than 15%. With that in mind, Deliveroo shares have piqued my interest.

Low jump in revenue

With stalling retail sales data in Q2 and consumer confidence levels hitting all-time lows, I was expecting revenue figures for the quarter to suffer. But Deliveroo surprised me with 4% growth in its gross transactional value (GTV) for Q2 and 8% growth in H1. I’d initially though that this was the result of inflated prices, but total orders grew too!

Nonetheless, there was a massive slowdown in growth when comparing Q2 2022 vs Q1 2022, and H1 2022 vs H1 2021 figures. According to management, Q2’s GTV per order was ‘down slightly’ on a year-to-date basis, due to pandemic comparisons. Additionally, the board revised its GTV growth outlook for the year from 15%-25% down to 4%-12%. So, why did the Deliveroo share price pop then?

Paddling back on cost

Well, the food delivery company’s full-year guidance for adjusted EBITDA remains strong, as the FTSE firm initially guided to finish the year with an adjusted EBITDA of -1.5% to -1.8%. If successful, this would show a steady improvement of profit margins, as Deliveroo went from -3.2% in H1 2021 to -2% in FY21.

Nevertheless, the company plans to deliver on its EBITDA promises by cutting costs throughout its business. It plans to implement gross margin improvements with more efficient marketing expenditure and tight costs control. More details will be available on 10 August 2022 when the firm releases its full earnings report.

Slower delivery?

I initially doubted Deliveroo’s ability to deliver on improved margins in this current macroeconomic environment, but CFO Adam Miller has proven me wrong thus far. If the company can deliver on its guidance and continue expanding once we’re out of a recession, it would still be on track to reach breakeven by 2024.

That being said, Deliveroo is having to forgo expanding its market share by protecting its margins. Doing so risks it losing its current position in the market. The blue kangaroo is still quite some way away to beating Just Eat, and has Uber‘s Uber Eats on its tail.

However, Deliveroo has an abundance of valuable partnerships that could help maintain its position in the market. These include key collaborations with companies such as Amazon, Sainsbury’s, WHSmith, Carrefour, and Waitrose. More interestingly though, its upcoming partnership with McDonald’s could help it passively capture market share, given the fast food chain’s contribution to revenue at Uber Eats.

Will I buy Deliveroo shares for my portfolio then? The company does have a solid set of financials — zero debt, £1.3bn in cash, and only £496m in total liabilities. Even so, I’m apprehensive, as an eventual 6% EBITDA margin is rather slim. Therefore, I’ll be keeping it on my watchlist for now, and may buy shares if there’s an improvement to its long-term guidance.

The post Should I buy Deliveroo shares at 96p? appeared first on The Twelfth Magpie.

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John Choong has no position in any of the shares mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Amazon, Deliveroo Holdings Plc, Just Eat Takeaway.com N.V., and Sainsbury (J). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Burberry

Burberry (LSE: BRBY) is a British luxury fashion house. The brand designs and distributes ready-to-wear items. These include leather goods, footwear, and fashion accessories. This week, a director sold thousands of Burberry shares, but they were also awarded from a huge chunk of free shares as part of their compensation.

• Name: Jonathan Akeroyd
• Position of director: Chief Executive Officer
• Nature of transaction: Free shares
• Date of transaction: 15 June 2022
• Amount purchased: 71,106 @ nil
• Total value: £N/A

• Name: Jonathan Akeroyd
• Position of director: Chief Executive Officer
• Nature of transaction: Sale to cover tax liabilities
• Date of transaction: 15 June 2022
• Amount sold: 34,395 @ £16.18
• Total value: £556,399.73

Greggs

Greggs (LSE: GRG) is a British bakery chain. It specialises in savoury products. Among these are bakes, sandwiches, sweet items, and its famous sausage rolls. This week, a non-executive director purchased a thousand Greggs shares.

• Name: Lynne Weedall
• Position of director: Non Executive Director
• Nature of transaction: Purchase of Shares
• Date of transaction: 16 June 2022
• Amount purchased: 1,000 @ £19.01
• Total value: £19,007.20

Deliveroo

Deliveroo (LSE: ROO) is a British online food delivery company. It operates in over 200 locations across the UK and internationally. In the UK, it is the second biggest food delivery platform behind Just Eat. A huge director dealing occurred over at Deliveroo this week. Tens of thousands of Deliveroo shares were traded.

• Name: Adam Miller
• Position of director: Chief Financial Officer
• Nature of transaction: Free shares
• Date of transaction: 15 June 2022
• Amount purchased: 83,200 @ £0.81
• Total value: £67,392.00

• Name: Adam Miller
• Position of director: Chief Financial Officer
• Nature of transaction: Sale to cover tax liabilities
• Date of transaction: 15 June 2022
• Amount sold: 40,314 @ £0.81
• Total value: £32,654.34

Types of shares in a SIP

To provide context, there are a few types of shares within a company’s share incentive plan (SIP). A SIP is an employee plan for companies within the UK to flexibly award equity to employees. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

In this instance, the director dealings at Burberry and Deliveroo were free shares. These are a form of restrictive stock units (RSU). RSUs are a form of stock compensation. It is a promise from the company to award a company’s shares in the future.

For Burberry’s CEO, these shares are yet to be cashed in. As such, they hold nil value. But for Deliveroo’s CFO, shares were awarded at the stock’s market price at that time. This means that he decided to cash in his awarded shares.

The post Director dealings: Burberry, Greggs, Deliveroo appeared first on The Twelfth Magpie.

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• The Greggs share price has crashed 50%! Now see what it could be worth this time next year

John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has recommended Burberry, Deliveroo Holdings Plc, and Just Eat Takeaway.com N.V. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Since the company’s initial public offering, the Deliveroo (LSE: ROO) share price has plummeted by more than 70%. The shares are currently trading for less than £1, which makes me wonder whether they can recover from these levels.

Deliveroo results

Despite reporting a decent set of Q1 results, the Deliveroo share price continues to fall. Orders, gross transaction value (GTV), monthly active customers (MAC), and average monthly order frequency all saw healthy increases. And although GTV per order saw a decline, this was attributed to the artificial spike from the pandemic, as the figure actually returned to pre-pandemic levels.

Based on the data, it seems to me that Deliveroo’s business is more volume-based than quality-based. As such, its focus will be to recruit more customers, rather than getting customers to spend more per order.

Hopping to great heights

Since 2015, Deliveroo’s UK market share has grown to an impressive 22% from 5%. The food delivery service has managed to continue snatching market share away from its biggest competitor, Just Eat, and looks towards possibly overtaking in the future.

One of the main reasons for Deliveroo’s aggressive growth has been its key partnerships. In the last year, it has partnered with the likes of WH Smith, Sainsbury’s, Waitrose, Morrisons, and Carrefour. These partnerships have allowed the firm to deliver fresh groceries and even appliances, thus expanding its product offering.

Not to mention, its strategic collaboration with Amazon has provided a surge of new customers. Amazon Prime users are eligible for free Deliveroo Plus perks, such as free delivery. As a result, Deliveroo saw its MAC increase by a million over the last year.

More excitingly, the firm recently announced a new partnership with McDonald’s, with a roll out expected in Q2 2022. Given that McDonald’s contributed to over 60% of Uber Eats’ sales in 2020, I have no doubt that the fast food chain is going to boost Deliveroo’s top line.

Cash-rich pouch

All that being said, Deliveroo has got to buckle up. The company no longer enjoys pandemic tailwinds as workers return to the office, and inflation continues to run rampant. Real wages are continuing to decline and a recession is being pencilled in for later this year.

Fortunately, Deliveroo sits on a large pile of cash at £1.3bn with zero debt. It only burnt through £224m in 2021, giving it a cash runway of about 5.8 years. Given that management expects to achieve breakeven on an adjusted EBITDA margin by 2024, this shouldn’t be a problem. However, a potential recession could push its timeline backwards and sour investor sentiment even further.

Although Deliveroo expects to be profitable by 2026, a 6% EBITDA margin is rather slim. Moreover, it faces tough competition from Uber Eats, which recently launched its own free delivery subscription to compete with Deliveroo Plus.

Analysts aren’t forecasting Deliveroo to be profitable within the next three years either. Therefore, I’m not expecting the Deliveroo share price to recover from penny stock levels any time soon. So, even though Deliveroo’s partnerships bring exciting times ahead, I’m not a fan of its low-margin business model, nor its shares for the time being.

The post Can the Deliveroo share price recover from penny stock levels? appeared first on The Twelfth Magpie.

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• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

John Choong has no position in any of the shares mentioned at the time of writing. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Amazon, Deliveroo Holdings Plc, Just Eat Takeaway.com N.V., and Sainsbury (J). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

ITV

Broadcaster ITV (LSE: ITV) is down to publish final results on 3 March. 

Unlike other loosely-labelled ‘value’ stocks, shares in the £4bn cap haven’t really benefited from the rotation away from growth plays in recent weeks. That’s despite Covid-19 restrictions coming to an end and the company making lots of positive noises about a recovery in advertising revenue when it last reported to the market in November. Perhaps traders are concerned that viewing figures will drop as people prioritise getting out more in the months ahead.

The invasion of Ukraine by Russia has shown just how few ‘safe havens’ there are in the stock market. I certainly wouldn’t include ITV in this category given the competition it faces from companies such as Netflix and Amazon. At seven times forecast FY22 earnings, however, I continue to believe that the shares are too lowly rated, especially if dividends are reinstated in the near future. 

The road ahead could still prove bumpy. Even so, I’d be willing to buy at the current level. 

Deliveroo

Also reporting next month is takeaway delivery firm Deliveroo (LSE: ROO). It’s down to release full-year results on 17 March. 

As an investment, I’ll admit to not being the company’s greatest fan. In fact, I stated last December that I’d only consider getting interested in the stock if it fell by another 50%. Since then, it’s tumbled by 45%. 

Now, a lot of this isn’t necessarily down to anything Deliveroo’s done or not done. The aforementioned exodus from highly-valued growth stocks since the beginning of 2022 has been pretty indiscriminate. That said, the company’s lack of profits can’t have helped. With rampant inflation now squeezing discretionary income, I’m wondering if there could be a few nasty surprises to come next month. 

Investors will be looking to see whether the company has managed to hit the 7.5%-7.75% gross profit margin guidance it gave in its last update. If not, I can see the share price being hammered again. Unsurprisingly, I don’t intend to snap up this stock before then.

Ocado

A final FTSE 100 stock I’ll be watching next month is Ocado (LSE: OCDO). An update on Q1 trading is expected on the same day as Deliveroo’s results: 17 March.

As impressive as the company’s automated warehouses are, I’ve long been perplexed by how an unprofitable business like this can occupy a space in the top tier. In fact, recent share price activity suggests more investors are tiring of the company’s ‘jam tomorrow’ strategy. Ocado’s valuation has tumbled 40% in the last year.

Sure, the recent full-year numbers weren’t bad. Revenue for the 12 months to 28 November was 7.2% higher (at £2.5bn) than the previous year. Five high-tech Customer Fulfilment Centres (CFCs) were also opened over the period. However, the big question now is whether trading has been impacted by galloping prices. If it has, Ocado’s downward trajectory could continue in March. 

I’m not going anywhere near the stock until I get some clarity on this. 

The post 3 FTSE 100 stocks I’ll be watching in March appeared first on The Twelfth Magpie.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon, Deliveroo Holdings Plc, ITV, and Ocado Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Back in August, I questioned whether the Darktrace (LSE: DARK) share price was a ticking time bomb. Despite concluding that it probably wasn’t, I did suggest that it might let off some steam at some point. 

In retrospect, it turns out that the former may have actually have been appropriate. The cybersecurity firm’s value has tumbled 30% in the last month alone.

Is it time for me to scratch that contrarian itch (as others seem to be doing today) or could there be more bad news to come? Let’s begin with a quick recap.

The Darktrace share price: what gives?

It was all going so well. Priced 250p a pop at its IPO, Darktrace stock went as high as 1,003p per share earlier this year. Towards the end of October, however, it all began to unravel.

The first capitulation occurred when analysts at Peel Hunt questioned whether the company was really worth its multi-billion pound valuation. Citing growing competition and Darktrace’s low R&D spend, their target price was just 473p. 

The downward pressure then continued as the post-IPO lock-up period came to an end and original investors jettisoned their holdings. Board members were also active sellers. Records show non-executive director Vanessa Colomar pocketed over £8m in November. That’s hardly encouraging.

From hitting that 52-week high, the Darktrace share price has now fallen 60%. So, where does it go from here?

Where next?

As always, no one knows for sure. So, let’s focus on a few positives first.

There’s little point arguing against the idea that cybersecurity will remain a major investment theme going forward. Assuming nothing truly awful happens, it seems likely that Darktrace’s self-learning AI will likely mop up a decent proportion of this business from multiple industries looking to protect themselves from bad actors operating online.

Regardless of share price antics, it’s also clear the firm is growing well. October’s Q1 trading update revealed a 50.8% increase in revenue (to $93.1m) compared to the previous year. FY22 growth of between 37% and 39% is now expected. Broker Berenberg remains a fan too, recently stating that “any share price capitulation is a result of fear not fact“.

On the flip side, one can argue that the valuation is still too high at a price-to-sales ratio of 13. While seemingly unrelated, the rise of Omicron could also push investors to sell what they can and batten down the hatches. Even if the general market sell-off doesn’t continue, Darktrace should be demoted from the FTSE 100 on December 20. 

The situation isn’t helped by the Cambridge-based business having a very small free float (the number of shares available to buy and sell on the market). This could make any falls all the more dramatic because it takes less to budge the needle. Of course, big moves in the opposite direction can also occur, as evidenced by today’s 6% rise.

Better opportunities

Darktrace is in something of a dark place right now. While more positive on this company compared to fellow 2021 IPO stock Deliveroo, I can’t help but think that its similarly unprofitable status could haunt it going into 2022, especially in a market where traders are already nervous about the pandemic and the threat of rising interest rates. 

In looking for compelling growth plays, the £2.6bn cap doesn’t make my shortlist just yet. 

The post The Darktrace share price is down 30% in one month! Where’s it going in 2022? appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Deliveroo Holdings Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Post mini recovery, the valuation of Deliveroo has dropped back again. In fact, it’s now hit levels not seen since the end of April, following its disastrous IPO. Could it fall further moving into 2022? And would I be a buyer if it did?

Gig workers rule

The latest obstacle faced by the company is news that the European Commission has drafted news rules for gig workers. These would compel firms like Deliveroo to classify their drivers and riders as employees, entitling them to a minimum wage, pension and paid holidays. To date, these businesses have regarded workers as independent contractors.

As you might expect, such a move would mean far higher costs for ROO and its rivals. And while some of this can be passed on to the customer, there’s clearly a limit on what they’ll be prepared to pay.

Right now, nothing is set in law. However, the 20% fall in the Deliveroo share price in the last month suggests investors are once again wary. 

Will the Deliveroo share price fall further?

There’s certainly nothing to stop things from getting worse before they get better. It’s not just the threat of new legislation either. Like many highly-valued stocks across the pond, Deliveroo remains unprofitable. That could prove very unattractive to investors if inflation were to force a hike in interest rates. Even if this doesn’t happen soon, the sheer amount of competition Deliveroo faces can’t be ignored. If it possesses an economic moat, I’m struggling to see it.

It’s also worth mentioning that Deliveroo’s free float (the number of shares available on the market) is pretty low for a company of its size, at just 70%. This means its stock has the potential to be more volatile than other UK heavyweights. 

Reasons to be cheerful

Of course, no one has a crystal ball. While my call in October turned out pretty well, it was little more than educated guesswork. And there are certainly reasons for thinking the Deliveroo share price could stage another recovery as we move into 2022.

The emergence of the Omicron variant, for example, has already pushed the number of people dining out down to its lowest levels since May. That could/should be beneficial to Deliveroo, just as it was during the three national lockdowns. People still need to eat and a takeaway is an affordable luxury to raise the spirits in the dead of winter.

It’s also worth highlighting that, due to legal challenges, it will probably be a good while before Deliveroo needs to factor the aforementioned gig worker rules into its business plan. This delay could prove profitable for traders, albeit less so for long-term investors like me. 

Still overvalued

To be clear, I’ve nothing against Deliveroo as a company. I’ve used its services on a few occasions and been more than satisfied. At £4bn, however, it still looks overvalued to me. Lose another 50% and that view might change. For now, I’m maintaining my wide berth. 

The post I was right about the Deliveroo share price. Here’s what I’m doing now appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Deliveroo Holdings Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Today, I’m taking a fresh look at the company and asking whether this weakness could represent an opportunity in advance of next week’s Q3 numbers (due 20 October).

Deliveroo share price: time to hop on board?

Based on its most recent set of numbers, Deliveroo certainly looks like a compelling growth play. 

Back in August, ROO revealed that the value of orders placed using its platform had more than doubled in the first six months of its financial year to £3.39bn. Importantly, the company also said that it had seen “no material impact” from the reopening of restaurants in Q2. This was always one of my biggest concerns with the stock and suggests that there has now been a permanent shift in consumer behaviour.

A spate of deal-making in recent months has also been very encouraging. Building on its existing partnership with German discounter Aldi, ROO has recently hooked up with another supermarket, Morrisons, to offer a rapid delivery service (Hop) in southwest London initially, 

Clearly, any signs of initial success with this initiative and news of more deal-making next week could reassure holders. It could also succeed in helping the Deliveroo share price recover its mojo after a wobbly September.

On the other hand…

As positive as recent developments have been, there are also a number of reasons to steer clear. Perhaps the most pressing of these is that investors are taking flight from previously-loved growth stocks such as ASOS, partly due to concerns over cost inflation and supply chain hold-ups.

One might rationally argue that Deliveroo is operating in a very different area. But it’s still part of the next-gen, tech-based business wave. What worries me is that ASOS is profitable. Deliveroo won’t be for some time. This makes it harder to accurately value its stock, and this ‘jam tomorrow’ strategy could really backfire if we see a rise in interest rates to quell inflation.

Competition is another concern. We’re not only talking Just Eat or Uber Eats here. Across the UK and Europe, new firms promising ultra-fast delivery have sprung up, attracting customers with big initial discounts. That means margins will likely be very small for everyone involved. It also makes ROO look unexceptional.

Interestingly, JP Morgan recently cut its target for the Deliveroo share price to 320p from 393p. That’s not encouraging in the run-up to next week’s update. However, it may be more realistic considering the challenges ahead. And to be fair, it would still give me a 15% gain from here.

My verdict

The Deliveroo share price still languishes far below its IPO value (390p). So long as the firm is able to continue winning market share and show progress towards making a profit, I think there’s a good chance of the company getting back to this level in time. The question, however, is just how long investors will be patient.

As things stand, I think we might see a brief rally on 20 October. That said, I’m still not tempted to buy today. To really get me interested, the Deliveroo share price needs to fall significantly.

I feel ROO definitely isn’t a bargain today.

The post Is the Deliveroo share price a bargain ahead of next week’s update? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended ASOS, Deliveroo Holdings Plc, Morrisons, and Uber Technologies. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.