Barclays is still not sure of the potential for Deliveroo PLC (LSE:ROO), even though it stuck a 165p price target on the delivery group’s shares today.
That’s a 45% premium to the market price, but analysts at the UK bank could still only put a 'hold' recommendation on Deliveroo shares.
“We like many parts of the Deliveroo story: grocery positioning, Plus subscription, London market share, sustainability of post-pandemic growth, incentivised founder-led team and the broader customer proposition,” the bank said in a note.
“The market cap is ‘only’ £2bn with £1.3bn of cash and, on an internet analyst way of thinking, 0.1x GTV (transaction value) and 2x Gross Profit in '22E look dislocated. We believe there is value.”
But answering its own question of why just a hold/equal-weight, Barclays says “Clear catalysts are needed to push 'concept' stocks right now.”
“For Deliveroo, we are slightly below consensus EBITDA in '22E and '23E. And, although the asset might well be strategic at some point, it isn't our base case that Deliveroo-specific M&A happens near term.”
Hence it prefers rival Just Eat Takeaway.
Shares in Deliveroo rose 0.9% to 115p and Just eat by 3.6& to 2,379p.