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Just Eat set to deliver more on the downside

Article By: ,  Financial Analyst
March 6, 2019 9:45 AM

Just Eat set to deliver more on the downside

Just Eat’s 2018 earnings were tasty on paper, but the share price reaction reeks of disappointment.

  • The £5.3bn group’s adjusted core earnings were £173.9m, just above £172m expected according to Bloomberg. Revenues rose 43% to £780m.
  • The group retained guidance for 2019 revenues as high as £1.1bn
  • But shares dropped sharply at open and were 2% lower at mid-session, signalling investor dissatisfaction on:
    • Investment costs: building a delivery network is pricey, hitting margins and cash flow (the latter fell 6% to £157m).
    • UK order growth slipped to 13% in Q4 vs. Q3’s 13% and JE missed 2018 expectations

Losing first-mover advantage

  • Uber’s restaurant network grew faster last year, Deliveroo’s three times as fast
  • Multibillion-dollar Uber’s could outspend all comers
  • Cross-border synergies are problematic, so a takeover looks unlikely for now
  • There is still no permanent CEO. The interim incumbent ruled himself out on Wednesday; the one before lasted 16 months
  • The Q1 2019 statement, expected in late-April should be a catalyst

Technically, the shares, listed five years ago, broke their first long-term rising trend last August and are set to struggle unless they establish a new one. The 889.4p top of that month is a key decider.

A shorter-term uptrend provides support, as does the 763-756p region but any repeated failure at this week’s 782.2p top will almost certainly quicken JE’s downdraft.


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