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.

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.

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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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.

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.

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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.

Bidding war

The standout driver behind the Morrisons share price is the bidding war for its acquisition. This is between US private equity firms CD&R and Fortress and has been heating up over the past few months. CD&R had initially offered a £5.5bn bid which was declined by the Morrisons board after being considered undervalued. Fortress then entered the scene with an increased £6.7bn bid, a 272p share offer. This was recommended by the Morrisons board to investors. However, CD&R then came back with a £7bn offer which was accepted by Morrisons last week.

This £7bn offer marks a per-share value of 285p. When the offer news broke, the share price jumped from 279p to above 290p. Fortress has been left “considering its options”, but British takeover rules still allow Fortress to submit a higher offer. If this was the case and the bidding war continues, I think we could see the short-term Morrisons share price push higher. What’s more, there is talk among analysts that Morrisons partner Amazon could enter the bidding war. If this were to happen, prices could be pushed up even further.

Valuation problems

The bidding war seems to be good news for the short-term Morrisons share price. However, it has also led to a pretty steep valuation of the company. The current Morrisons price-earnings (P/E) ratio is 72.5 times. Comparing this with a similarly priced competitor like Tesco who has a P/E ratio of just 4 times begs the question of whether the Morrisons share price is vastly overvalued.

There are also further complications that Brexit has brought to the food retail sector. Worries of potential shortages well into 2022 are likely to halt growth in the industry. Industry leaders have urged the government to relax immigration rules to fill growing gaps in the workforce. Moving forward, this could be a major concern for the Morrisons share price.

Morrisons share price: the verdict

The short-term price moves will be made in reaction to new bidding news. This could certainly push the Morrisons share price higher. However, this is too hypothetical for me to add Morrisons to my portfolio just yet. I prefer to focus on the tangibles such as valuation and Brexit. For me these factors currently outweigh the opportunity the bidding price war brings. Therefore, although I believe the Morrisons share price could theoretically climb higher, I won’t be adding it to my portfolio today.

The post Can the Morrisons share price keep climbing higher? appeared first on The Twelfth Magpie.

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Dylan Hood has no position in any of the shares mentioned above. 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 owns shares of and has recommended Amazon. The Motley Fool UK has recommended Morrisons and Tesco and has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. 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.

Deliveroo shares: now delivering

Last month’s upgrade to growth forecasts certainly took me by surprise. With quarterly food orders having rocketed 88%, Deliveroo said its gross transaction value would increase by somewhere between 50% and 60% in 2021. That’s a stonking improvement on previous expectations of between 30% and 40%. 

Elsewhere, the company’s potential withdrawal from Spain makes sense, considering it only generates 2% of its gross sales here and significant investment would be required to improve this. In a highly competitive environment, Deliveroo needs to pick its battles. Based on these developments, the recovery feels justified.

Then again, many of my original concerns haven’t changed. The company doesn’t make a profit and won’t for some time, due to ongoing investment. The share ownership model is still questionable and the debate over the rights of gig workers won’t cease anytime soon.

Whether the above is sufficient to stop the recovery in Deliveroo shares is another thing, of course. A few firms have struggled following their IPO only to go on to deliver stunning gains, despite ongoing concerns (step forward Facebook).

If I were to buy a tech-related stock right now however, it wouldn’t be this one. I think there’s a better option hiding in plain sight in the FTSE 250.

Better tech buy

I doubt Bytes Technology (LSE: BYIT) will be on the lips of many private investors. The  UK-based company has only been listed since December 2020, following a demerger from South Africa-based Altron Group. However, this may be set to change. 

BYIT is a specialist in providing software, security and cloud services. Given that cybersecurity is and will remain hugely important going forward, I think the company could find itself in a sweet spot.

Business is already good. Back in May, the company announced that revenue had grown by 5% to £393.6m in the year to the end of February. Robust spending by customers over the pandemic also allowed BYIT to log record adjusted operating profit of £37.5m. More recently, the business reported strong demand from clients in the public sector.

What’s not to like?

One drawback is the valuation. At almost 36 times forecast earnings, shares are undeniably pricey to acquire. This arguably makes them more susceptible to a big fall if we get some less-than-encouraging news on, say, the global economic recovery (although there’s potential for Deliveroo shares to fall harder, given the aforementioned lack of profitability). Margins in this line of work are also pretty thin and rising costs should be expected following the lifting of restrictions. 

Notwithstanding this, the company has net cash on its balance sheet. Returns on capital are also seriously good. BYIT also benefits from a huge amount of customer loyalty, which may give it the edge over peers.

One to watch

Recent news makes me think I may have been too dismissive of Deliveroo shares. Nevertheless, I’d still be far more comfortable buying stock in a company already making decent profits.

I wouldn’t go ‘all-in’ on BYIT today. However, a small starter position might be in order.  

The post Would I buy Deliveroo shares now? appeared first on The Twelfth Magpie.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, 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 owns shares of and has recommended Facebook. 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.

Cause for concern?

Deliveroo released its 2021 Q1 results on 15 April. The figures were very encouraging for the company. However, what concerns me is how these results were perceived. Group orders were up 114% year-on-year and transactional value was up 130% over the same period, reaching £1.65bn. This marked a fourth consecutive quarter of growth for the firm. I would have expected these stellar results to drive up the Deliveroo share price. Yet the week after these results were issued, the share price fell by 11%. This concerns me and may highlight a wider negative sentiment towards Deliveroo.

This sentiment can be explained by some of the wider ethical concerns surrounding the company. Several institutional investors including BMO Global, and Aviva announced that they would be steering clear of Deliveroo due to the poor treatment of its workers. Problems like this could continue to haunt the share price in the future.

Reasons for share price growth

But there’s change afoot. In the past 30 days, the Deliveroo share price has risen 20%. A key driver behind this growth is the fact that Deliveroo has just won a legal battle to keep its workers classed as self-employed. This good news for the firm as it means that it can avoid the extra costs incurred by classifying workers as employees. This was the case with Uber, where courts ruled drivers would be eligible for the minimum wage and sick pay. The saved costs will improve Deliveroo’s balance sheet and speed up the company’s move towards profitability.

In addition to this, its Q2 earnings report helped drive up the share price. Year-on-year orders and transactional value increased 88% and 76%, respectively. While these results initially drove up the share price, Deliveroo stock finished the day 4% lower than its opening price. That reinforced my wider concern over the share price, although there’s no denying that it’s in a better place in July compared to several months ago.

Will we see more growth?

I think the Deliveroo share price has the potential to rise higher in the future. If the half-year results (set to be published on 11 August) show more growth, I think we will see a rise in the price. However, whether this rise can be sustained is down to wider sentiment towards Deliveroo and its worker treatment. I believe it will be a long time until we reach the 390p IPO level again and therefore I won’t be buying any Deliveroo shares for my portfolio today.

The post Can the Deliveroo share price keep climbing? appeared first on The Twelfth Magpie.

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Dylan Hood has no position in any shares mentioned above. The Motley Fool UK has recommended 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.

Over the last six months, no other FTSE 100 company’s share price has fallen further than Just Eat Takeaway’s (LSE:JET). Just Eat Takeaway shares are currently valued at around 6,400p, after a six-month drop of 19% and a one-year drop of 26%.

Strangely enough, this is what got me interested in taking a deeper look at the company. I was curious whether this fall in the Just Eat Takeaway share price had created an opportunity to buy.

The reasons for the drop

The pandemic lockdowns hit some businesses hard while others thrived. For Just Eat Takeaway, it was the latter. In its 2021 first-quarter results, the company reported 96% year-on-year growth in the numbers of orders in the UK. It also reported a 695% increase in orders for delivery, which can be substantially attributed to the lockdown in the UK.

However, towards the end of last year, this explosion in orders had been accounted for when investors drove the Just Eat Takeaway’s share price to its highest point of 9,980p. Since that point, the share price has steadily fallen.

Just Eat Takeaway was then further hit, as investors began to shift capital away from tech and growth stocks earlier this year. One of Just Eat Takeaway’s major rivals, Deliveroo, launched an IPO earlier this year only to see its share price plummet.

I can see why short-term investors would consider future growth for such companies to be limited, as lockdowns ease across Europe. It’s unlikely that Just Eat Takeaway will again see the dramatic increase in orders as in its first-quarter results.

Adding to these concerns are the broader issues with the food delivery sector. Just Eat Takeaway has a number of competitors in the market and all are struggling to achieve profitability. Deliveroo, Uber Eats, and Postmates, all rivals to the company, posted losses in full-year 2020 results. Just Eat Takeaway was no different here, as the company stated a £129.5m loss in 2020.

Just Eat Takeaway shares: to buy or not to buy?

However, I think that the sell-off of Just Eat Takeaway shares has been too dramatic. After its upcoming merger with Grubhub, the company will be the largest online food delivery company outside China.

Just Eat Takeaway’s US expansion will add to its existing developed positions in the UK, Germany, Canada, and the Netherlands. In first-quarter results, total orders grew in all of these countries by more than 50%. Beyond this, the company is active in 23 countries. This provides Just Eat Takeaway shareholders with a position in a company with broad exposure to the global market.

Despite these factors, I don’t believe Just Eat Takeaway shares deserve the sell-off seen over the last six months. At the company’s current share price, I will be looking to buy to develop a long-term position.

The post Just Eat Takeaway shares: does a 6-month drop represent a buying opportunity? appeared first on The Twelfth Magpie.

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Ben Hargreaves holds no position in any of the shares mentioned. The Motley Fool UK has recommended 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.

The Marks and Spencer (LSE: MKS) share price was on the front foot this morning, despite the company reporting a huge loss as a result of the coronavirus pandemic. Should investors like me take this as a sign that all the pain is priced in and the shares are finally worth buying?

Big loss

Sure, today’s full-year numbers were never going to be pretty. The closure of high streets and multiple UK lockdowns would never be good news for the 137-year-old, former FTSE 100 firm.

Group revenue came in at just under £9bn for the 52 weeks to 27 March. This was 12% lower than in the previous financial year. MKS’s food sales continued to offset poor performance elsewhere with like-for-like revenue rising 1.3%, supported by its deal with online grocer Ocado. In contrast, revenue from its Clothing & Home ranges plummeted 31.5%.

It gets worse. Profit before tax and one-off costs fell to just £41.6m. That’s a 90% fall from the £403.1m achieved in the previous year. Once those costs are factored in, a pre-tax loss of £201.2m was reported, down from the £67.2m profit achieved in the previous year.  

Contrarian play?

The fact that the MKS share price is rising today can’t make up for the fact that the firm, from an investment perspective, has long been a losing bet, I feel. Over the last five years, its stock has more than halved in value. By contrast, the FTSE 250 that Marks features in is up 31%. In other words, investors could have achieved a far better return by buying a simple exchange-traded fund that tracks the index. But could now be the time to buy?

There are a few reasons to be hopeful. In addition to the reopening of high streets, CEO Steve Rowe’s strategy to transform the company (the Never the Same Again programme) appears to be gathering pace. The deal with Ocado is bearing fruit with M&S products now making up over 25% of Ocado’s average basket. The firm also reported growth of 53.9% in online clothing and home revenue today, helping to justify the decision to close underperforming physical stores. 

However, there are still things that would make me wary as a potential investor. 

Buyer beware

After so many false starts, I remain sceptical that Marks can succeed in attracting shoppers back to its stores. Talk of building “a trajectory for future growth” and making the company “special again” sounds great. However, we’ve been here before. The retailer needs to find and retain a lot of new customers. That’s a big ask.

There are other things I don’t like. Net debt still stands at just over £3.5bn including lease liabilities. Forget having a “strong liquidity position” — why buy M&S when there are online-only operators boasting massive financial war chests and no physical stores to maintain? Elsewhere, operating margins have been woeful for years, as have the returns on capital invested.

In addition to all this, MKS isn’t currently paying dividends. As such, shareholders aren’t being compensated for their patience. To me, this makes the opportunity cost of not investing elsewhere very high.

Bottom line

Today’s share price suggests that a lot of the pain is priced in and that MKS shares might finally worth buying. With so many better options available in the market, however, I’d wait to see signs of real progress before considering adding the shares to my portfolio.

The post Are Marks and Spencer (MKS) shares finally worth buying? 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 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.