Just Eat Takeaway (LSE: JET), the FTSE 100 food delivery provider’s latest trading update is hugely positive. Earlier today it reported a 57% increase in orders and expects an over-50% increase in revenues for the year.
JET has undoubtedly seen a demand filip from the lockdowns. As restaurants became inaccessible, ordering in became a popular option and continues to be so. But I think JET’s gains are unlikely to be just a flash in the pan.
On the contrary, I expect it to continue accruing share price gains over time.
Here are three reasons why:
#1. Favourable structural shifts
I think there are unmistakable structural shifts currently underway in a number of industries. One of them is towards online shopping, whether it’s for clothes, groceries, cars, or takeaway food.
While the online market is already quite developed in the UK, it’s forecast to see continued growth over the foreseeable future. Further, JET, which was formed by merging the UK’s Just Eat and the Netherland’s Takeaway.com, has market presence in international markets as well, which only increases its scope for growth.
#2. Strong positioning for the FTSE 100 stock
The merger also made JET one of the biggest global delivery companies, which puts it at an advantage anyway. The company’s acquisition of US-based Grubhub later in the year further opened up the US market to it.
In its latest update, the company adds that it has “further strengthened its market leading positions by significantly investing in its most important countries”. In particular, it talks about the UK market, its biggest by number of orders. JET says that it has put “tremendous effort” into improving the business.
#3. Improving revenues
While JET’s top-line has definitely benefited from the lockdown-induced growth, its revenues were improving even earlier. It’s true that the company is still loss-making, but given the market growth and its own position in it, I reckon it’s only a matter of time before that changes.
Risks to JET
But it’s not like there aren’t risks to JET.
A key risk is competition. As a consumer, I order from both JET and from Deliveroo. Often though, I find myself veering more towards Deliveroo, in no small part because it’s far more proactive in communicating the latest deals.
This is one consumer’s individual experience, however, and in no way takes away from the growth that JET has seen. I am filing this as a point to note in my mind for the future, however.
The takeaway
For now, the three reasons above are convincing enough to me, though. Moreover, the consensus on JET is positive as well. According to data compiled by The Financial Times, most analysts have put a ‘Buy’ rating on the stock. An over-15% increase in stock price is also expected in the next 12 months as per the average forecast. I’d buy it.
