Delivery Hero: Will profits be delivered soon?
For the food supplier Delivery Hero, the signs are pointing to growth. The Berlin-based start-up, which was founded in 2011, recently raised its sales forecast. In addition, the company purchased the Zomato delivery service in the United Arab Emirates, which is intended to open up further new markets. The number of orders placed with Delivery Hero is also rising steadily - worldwide. However, the young MDax company could now face permanent competition from the US giant Amazon. What's going on at Delivery Hero, what analysts are saying and how the stock has developed.
The situation of the company:
It was a message that worried food delivery services across the industry: on 17 May, US online retailer Amazon announced that it would participate in a $575 million financing round for UK delivery hero competitor Deliveroo as the largest investor. The Berlin stock then dropped by up to four percent in some phases, and the prices of other competitors such as Just Eat <GB00BKX5CN86>, Takeaway and Hellofresh <DE000A161408> also fell, in some cases significantly.
With its size and financial strength, Amazon could sustainably shake up the already fiercely contested market for food suppliers. It is still unclear, however, whether the US investment in Deliveroo is just the beginning of a large-scale offensive in the online food business. Amazon could turn Deliveroo into a powerful competitor, partly operating in the same markets as Delivery Hero.
Irrespective of this possible scenario, the Berliners are consistently driving their business forward and growing rapidly. The company, which has only been listed on the stock exchange since the end of June 2017, increased sales in the first quarter by 94 percent compared to the same period of the previous year, with orders rising by more than half. CEO Niklas Östberg now expects revenues of between 1.1 and 1.2 billion euros for the full year - slightly more than assumed at the end of 2018.
The Middle East and North Africa regions in particular are growth drivers for Delivery Hero. According to Östberg, the increasing number of restaurants and improvements to the platform are playing into the company's cards.
However, further steps are needed to make Delivery Hero profitable in the long term. Because the food supplier is still in the red. The company continues to expect a loss for the current year. Adjusted for special effects, the loss before interest, taxes, depreciation and amortization (EBITDA) is expected to range between EUR 270 and 320 million in 2019. Due to the good development in Europe, however, Delivery Hero intends to reach break-even there at least in the second half of the year.
There is also a lot of movement among Berliners with regard to purchases and sales. While Delivery Hero officially completed the sale of its German business (Lieferheld, Foodora, Pizza.de) to its rival Takeaway, announced in December last year, at the beginning of April, the company acquired the food delivery division of the restaurant rating platform Zomato from the United Arab Emirates at the beginning of March. Further strategic acquisitions are to follow.
That's what the analysts say:
Delivery Hero's securities are almost all rated positively by market experts. The average price target is just under 47 euros. Eleven of the 14 analysts listed in the dpa-AFX-Analyser recommend buying the shares of the food supplier, two experts recommend holding them. Only analyst John King of the US investment bank Merrill Lynch has expressed skepticism. He left Delivery Hero's rating at "Underperform" and, in a technology industry study, emphasized his clear preference for the papers of his British competitor Just Eat.
In contrast, analyst Silvia Cuneo from Deutsche Bank is much more positive. The reason she gave for her "buy" rating was that the gap in order growth between Delivery Hero and its competitors Just Eat and Takeaway had widened even further in the first quarter. Cuneo sees further potential after the strong quarterly figures.
It is thus in line with analyst Marcus Diebel of the US bank JP Morgan, who has upgraded the share from "Neutral" to "Outperform". He raised his price target to 51 euros. Seine
Justification: The outlook for food suppliers remains promising and Delivery Hero is his preferred value in the industry. The company's investments declined and sales growth picked up, resulting in an improvement in the ratio of opportunities to risks for shares.
Jefferies Delivery Hero, the analyst firm, is particularly confident of a great deal.
For example, analyst Giles Thorne has adjusted his estimates for the food delivery service and raised the price target to 55 euros.
It took into account the sale of the German business and the acquisition of Zomato in the United Arab Emirates.
Meanwhile, Bloomberg analyst Diana Gomes believes that the Amazon investment Deliveroos should accelerate growth in Europe and lead to more market share. Global players such as Delivery Hero and Takeaway.com are likely to be forced to step up their investments and expand their existing business models.
That's what the stock does:
Since their IPO at the end of June 2017, Delivery Hero's securities have gained significantly in value. While the issue price just under two years ago was 25.50 euros per share, it rose to over 50 euros by July 2018.
By the beginning of 2019, the share had returned to a good 30 euros and then recovered again. Now the paper is quoted at about 40 Euro /eas/elm/fba (dpa)
Note: This article has been translated using a computer system without human intervention. LUMITOS offers these automatic translations to present a wider range of current news. Since this article has been translated with automatic translation, it is possible that it contains errors in vocabulary, syntax or grammar. The original article in German can be found here.
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