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UBS chops Just Eat to ‘neutral’ from ‘buy’, slices target price as supportive signals not come through

The Swiss bank's analysts said: “Three surprises drive our more cautious view: negative trends for JE UK brand perception, a re-acceleration of UK share loss, and worrying search trends in many markets"

Just Eat sign
They added: “Our main concern is that JE is not investing enough at a time when capital is flowing into the industry and customer acquisition costs are rising”

UBS has chopped its stance for Just Eat PLC (LON:JE.) to ‘neutral’ from ‘buy’ and sliced its target price for the online food delivery firm despite a recent 20% share price correction by the blue-chip stock.

The Swiss bank’s analysts cut their target price for the FTSE 100 listed firm to 650p, down from 870p, with the shares currently trading at 609.20p, down 4.5% from Tuesday's close.

READ: Just Eat shares go sour as Amazon backs Deliveroo in US$575mln funding round

In a note to clients, the analysts said that, after leveraging five data sets from the UBS Evidence Lab, many of the supportive signals they had expected did not come through.

They added: “Three surprises drive our more cautious view: negative trends for JE UK brand perception, a re-acceleration of UK share loss, and worrying search trends in many markets. Our main concern is that JE is not investing enough at a time when capital is flowing into the industry and customer  acquisition costs are rising.”

The analysts said they have two sources of near-term concern: “1) our statistical work leads us to lower our 2019e UK order growth forecast to +9%, below company guidance of low to midteens, and 2) we are 5% below consensus on 2020e EBITDA, as JE will likely need to invest to contain share loss.”

However, they concluded: “ Signs of improved execution and a margin reset with a new CEO would be important factors for us to turn more constructive on the name.”

Quick facts: Just Eat PLC

Price: 754 GBX

LSE:JE.
Market: LSE
Market Cap: £5.15 billion
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