Positive trading update

Last week, Just Eat released its Q2 trading update. It said UK orders rose 61% from Q2 2020, while total orders (excluding the US) grew by 47% to 212m. The US saw a slowing growth rate compared to the half-year performance, but a 14% rise in orders highlighted how the business is capable of posting solid numbers even during the pandemic. Gross transaction value (GTV) grew by 44% in the UK, and 42% across all markets ex-US. GTV in the US remained static at €2.2bn. These results show an increase in a tough period, and with GTV for 2021 expected to be between €28 to €30bn, a rise in the Just Eat Takeaway share price could be on the cards.

To add to this, its recent acquisition of Grubhub in the US, along with its investment in Brazilian firm iFood, shows that the business is expanding. Its iFood investment returned revenue growth of 222% for 2020. Smart investments like these from management provide me with optimism for the future of the business.

Share price risks

I briefly mentioned it above, but the slowing US growth could pose an issue. Accounting for 25% of total orders, a continuation of this stagnation could see a drop in performance for JET. Not only this, but the dip in orders, in part, could be a result of the US easing Covid restrictions at a quicker rate than Europe. As restrictions ease, people are less likely to use Just Eat’s service – an issue that could begin to occur in Europe as we see some countries relax guidelines. If orders were to fall, this would have the potential to negatively impact the Just Eat Takeaway share price.

Another issue with Just Eat is the array of competition it faces. Rival Deliveroo, which IPO’d earlier this year, saw 88% growth in orders for Q2 2021 year-on-year. Other competitors such as UberEats have also been popular during the pandemic, and its recent acquisition of Postmates for nearly $3bn shows its ambition to conquer this sector. As more businesses attempt to gain a share of the growing market, could it be that Just Eat loses business as a result?

Would I buy Just Eat?

Although there are plenty of positives, the slowdown in the US does concern me. Not only does it directly impact the performance of Just Eat, but it may also reflect what’s potentially in store for Europe in the future as restrictions ease, with fewer people perhaps using food delivery services. As such, I could see the share price falling further. Predicted rising Covid cases could drive people back to home delivery services, but increased competition could mean that JET does not see the full benefit of this. As such, I’m not going to buy Just East just yet. 

The post The Just Eat Takeaway share price has fallen: should I buy? appeared first on The Twelfth Magpie.

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Charlie Keough holds no position in any of the shares mentioned. The Motley Fool UK has recommended Just Eat Takeaway.com N.V. 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.

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.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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.