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Investors feast on Just Eat as Barclays comes back for another serving

Barclays analyst Gerardus Vos thinks revenue momentum is building on the back of a successful marketing campaign, while he also believes Just Eat’s stake in a Brazilian firm is undervalued
takeaway food
‘Overweight’ is City speak for a ‘buy’ note

Online takeaway food marketplace Just Eat PLC (LON:JE.) was in demand on Thursday after Barclays came back to the table for another serving.

Analysts at the bank’s well-respected London arm moved their rating back to ‘overweight’ from ‘neutral’ and hiked their price target by a whopping 43% to £10 (from £7).

Momentum building

Barclays expects the FTSE 100 group to have built up strong revenue momentum in the final quarter of 2017 which should carry on through to 2018.

“For FY18 we calculate that revenues will surpass £710mln (consensus £656mln) due to decent growth in the marketplace, consolidation of HungryHouse, expansion of logistics and the new surcharge,” said Gerardus Vos in a note on Thursday.

Speaking of the recently introduced 50p service charge applied to every order, Vos reckons that, along with the addition of HungryHouse, it will add around £30mln to underlying earnings (EBITDA) in 2018.

He expects Just Eat to have generated net income of £113mln in 2017 with some of that being recycled by incoming chief executive Peter Plumb into logistics and marketing.

Brazil stake ‘underappreciated’

Away from its core UK market, the company has a 32% stake in a Brazilian firm which, on an order basis, is roughly half the size of its UK business.

Just Eat’s 32% stake in Brazil continues to be underappreciated by the market, in our view,” said Vos.

“The business is larger in orders than Just Eat’s UK business was in 2014 and we believe revenues could exceed £240m in two years’ time.”

The analyst reckons that stake is worth around 85p per share to Just Eat investors, while he notes that there is consolidation opportunity in the region with Delivery Hero seeing it as non-strategic.

Just Eat shares gained 5.6% on the back of the upgrade to 812p.

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