Just Eat Takeaway share price is down 25%. Would I buy it?

The Just Eat Takeaway share has been falling. But is that reason to ignore the food delivery app’s share?

| 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.

The short answer is yes, I would buy the Just Eat Takeaway (LSE: JET) share. I know that might sound confusing. After all, the share is down 25% in the past year. And in the interim, many stocks that were otherwise in a bad place because of the pandemic have risen fast. 

But this is exactly what makes the Just Eat Takeaway share attractive to me. At least some of the fast rising stocks have suffered financially during the past year because of the pandemic. On the other hand, its share price has fallen, but this FTSE 100 food delivery company is growing fast. 

Robust trading update for Just Eat Takeaway

Earlier today, Just Eat Takeaway released its trading update for the second quarter of 2021, which covers the post-lockdown period and also its numbers since acquiring the US-based Grubhub, which was completed recently. Its orders have grown by a significant 37% compared to the same quarter last year. This was slower than the 51% rise for the first half of the year, but still good. 

Also, the company is optimistic about its growth prospects. It now expects ex-Grubhub order growth to be at 45% for 2021, up from the 42% expected earlier. I think this is an important update, because these orders are 75% of the total.

US numbers disappoint

I do have one concern, though. And that pertains to its US order growth, which has fallen to 14% in the second quarter of this year. This is almost half of that for the first half of the year. While it is encouraging that other big markets like the UK and Germany are still growing fast, the fact is that the US does produce 25% of its total orders. Even more glaring is the fact that the total value of orders placed has remained static in the market compared to the same quarter in 2020. 

Choosing market share over profits

There is also the question of profits for Just Eat Takeaway. But here, the company offers a good explanation. It is encouraged by its recent success in growing market share in the UK and particularly in London, where it saw triple-digit growth. In light of this it says that it will “continue to prioritise market share over adjusted EBITDA”. EBITDA is a measure of profit before deducting the likes of interest and taxes, among others. 

I buy the argument that fast growing companies in a relatively new industry, in this case, third-party food delivery apps, need to focus on market share. It is in a competitive market, where growing fast can hold it in good stead in the long term. 

My takeaway for the Just Eat Takeaway share

I am somewhat concerned about the slowdown in the US market, and would like to keep an eye out for further developments there in its next updates. This is especially because it would indicate how the Grubhub acquisition is progressing. 

On the whole, however, I think the Just Eat Takeaway share looks attractive to me at the current price levels. I maintain that it is a buy for me

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.

Manika Premsingh has 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.

More on Investing Articles

Investing Articles

How much would I need to invest in income shares to earn £300 a month?

What kind of lump sum would be required to earn £300 a month by taking advantage of some of the…

Read more »

Investing For Beginners

Up 31% in a month, could this FTSE 250 stock be getting bought out?

Jon Smith takes a look at speculation that's pushing the share price of a FTSE 250 share higher and considers…

Read more »

Investing Articles

Here’s how I’d follow Warren Buffett to start building passive income in 2025

Ben McPoland highlights one FTSE 250 firm with a strong competitive edge that he thinks can continue rewarding investors with…

Read more »

Investing Articles

Burberry shares: undervalued FTSE gems that are ready to rocket?

Burberry shares soared at the beginning of the week as the takeover rumour mill went into overdrive. Is Paul Summers…

Read more »

US Stock

Here are the latest share price forecasts for S&P 500 giant Amazon

Amazon has generated monster gains for investors over the last decade. And Wall Street analysts believe the S&P 500 stock…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

2 high-yield FTSE 250 shares I’d buy today — and 1 that I’d avoid

UK markets have felt some volatility after last week’s Budget and the FTSE 250 was no stranger to it. Our…

Read more »

Investing Articles

3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA in cheap BT shares

BT shares are on the up but still cheap, while the FTSE 100 telecoms stock offers a good yield too.…

Read more »