What’s in store for the Deliveroo share price in 2022?

This Fool explains why he thinks the Deliveroo share price can outperform in 2022, if it is able to offset growth concerns among investors.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Following the company’s IPO at the beginning of the year, investors may have hoped the Deliveroo (LSE: ROO) share price would outperform the market in 2021. Unfortunately, the stock has consistently failed to gain the market’s support. It has lost around 25% of its value since the IPO. 

However, the company has made a lot of progress in 2021. Many investors doubted that the business could maintain 2020 levels of demand throughout this year, but it has proved them wrong. Not only has demand remained high, but it has grown. 

And the firm has capitalised on this rising demand by increasing the number of products on its platform. It has also established new agreements with suppliers and launched a service for Amazon Prime users. 

These growth initiatives should help support the company’s growth next year. 

The outlook for the Deliveroo share price 

Looking at the company performance over the last 12 months, I think Deliveroo’s top line and order volume will continue to expand in 2022. What is more challenging for me to determine is how the business’s bottom line will evolve, given the enterprise’s cost challenges.

The group has always relied on self-employed couriers to deliver its products. But the legal environment for these workers is shifting. 

Policymakers are moving ahead with changes, both in the UK and EU, that will alter the rights of these workers. This could have a significant impact on the corporation’s cost base. If it is forced to pay an hourly minimum wage, sick pay and offer time off, costs will jump. 

It is difficult to tell if the business will be able to pass these costs on to consumers. That is the reason why I think the Deliveroo share price has been under pressure during the past few months. If there is one thing the market hates more than anything else, it is uncertainty. Right now, there is a heck of a lot of it clouding the company’s outlook. 

Opportunities and risks 

Considering the opportunities and risks Deliveroo is dealing with, I am cautiously optimistic about the outlook for the stock in 2022. 

When the company IPO-ed, I was worried it could not maintain the growth rate reported in 2020 as the world opened up. The enterprise proved me wrong. As such, I think there is a chance it will be able to navigate the challenges currently facing the food delivery industry and come out on top in 2022. 

If the company can prove its doubters wrong, I think the Deliveroo share price could outperform next year. Still, I am not willing to go all-in on the business just yet. That is why I would limit the position to a speculative holding in my portfolio.

If the enterprise does charge ahead in 2022, I can always add to my holdings.  

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves 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.

More on Investing Articles

Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Google office headquarters
Investing Articles

1 reason I like buying S&P 500 shares – and 1 reason I don’t

Will this investor try to improve his potential returns by focusing more on S&P 500 shares instead of British ones?…

Read more »

Young woman holding up three fingers
Investing Articles

3 SIPP mistakes to avoid

Our writer explains a trio of potentially costly errors he tries to avoid making when investing his SIPP, on an…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

Here’s how (and why) I’d start buying shares with £25 a week

Our writer uses his investment experience and current approach to explain how he would start buying shares on a limited…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Here’s my 5-step approach to earning passive income of £500 a month

Christopher Ruane explains the handful of steps he uses to target hundreds of pounds in passive income each month.

Read more »

Investing Articles

2 UK shares I’ve been buying this week

From a value perspective, UK shares look attractive. But two in particular have been attracting Stephen Wright’s attention over the…

Read more »

Investing Articles

A lifelong second income for just £10 a week? Here’s how!

With a simple, structured approach to buying blue-chip dividend shares at attractive prices, our writer's building a second income for…

Read more »

Investing Articles

Here’s how I’d use a £20k Stocks and Shares ISA to help build generational wealth

Discover how our writer would aim to turn a £20k Stocks and Shares ISA into a sizeable nest egg by…

Read more »