Just Eat PLC (LON:JE.) shares nudged higher this morning after analysts at UBS upgraded the online takeaway marketplace to a ‘buy’.
The share price has been on a downward trajectory since the FTSE 250-listed group’s half-year results in July, with concerns over the clarity and costs of the delivery strategy but UBS analyst Chris Grundberg thinks these fears are overdone.
READ: HIgher promotional spending to hit Just Eat's margins
“We believe that the roll-out of delivery services through third-parties will further strengthen Just Eat's platform, which UBS Evidence Lab data shows remains robust and resilient in the UK,” wrote Grundberg in a note this morning.
The analyst added that he is “not too concerned” about delivery investments in the UK which will “remain limited” in his view at between £10mln and £20mln a year.
Just Eat customers are loyal
UBS’ UK takeaway spend tracker has found that Just Eat has the most loyal customers of any of its rivals.
Competition has long been seen as a potential stumbling block for the company, but Grundberg’s analysis shows that it has not lost market share despite the rise of Deliveroo.
“Deliveroo basket size is declining swiftly (down 8% y-o-y), indicating that competition could become more intense, but moving down order values is likely a costly move for a three-sided player and we see Just Eat as very well placed to respond.”
Given his more bullish outlook, Grundberg has upped his recommendation to a ‘buy’ although he’s slightly reduced his 12 month price target to 740p (from 760p).
Just Eat shares gained 1.4% in mid-morning trade to 654p.