Is Just Eat the perfect example of a company that’s loved by consumers but hated by investors?
The second part, at least, appears to be true.
The food ordering platform has lost 63% of its value in the year to date, and, the picture isn’t much prettier, down 81%, when you look to over the two years since the shares were first listed in the UK.
Yet, recent results suggest that the business is doing reasonably okay.
First-quarter order numbers were generally in line with the same period last year, which benefitted from a COVID-lockdown helping hand, as most customers were stuck ordering in rather than dining out.
Gross transaction value was up 4% to US$7.2bn, driven by higher user spending per transaction.
Nevertheless, Just Eat’s share price has had a tough run – until Wednesday’s deal with Amazon triggered an 18% rally.
Will the Amazon tie-up turn investor sentiments going forward, or, will City opinions drop back into malaise?
Competition in the food app sector is fierce, with elbows-out fighting for market share against Deliveroo and Uber Eats.
Though as Russ Mould, investment director at AJ Bell, told Proactive, it is all well and good adding customers and winning a land grab, but it is unclear how well that land grab can be translated into profits.
Mould suggests it’s difficult to fully monetise because of the ongoing demands for investment, which keep coming apace, particular for marketing and support services.
Essentially, Mould argues that JustEat may well be performing strongly compared to the competition, gaining customers - the latest results showed it added 20mln customers since April 2020 - but with that comes a greater need for investment.
The GrubHub x Amazon tie-up promises a bright spark, and, was plainly welcomed by investors.
Albeit, the price remains a long way away from JustEat’s all-time highs at around 9,980p so scepticism is perhaps understandable.
“The collapse of the share price means that the valuation is now much less stretched and the GrubHub deal shows that there is strategic value in the unit,” Mould noted.
Investors will be hoping that this may be the first in a series of deals to bring the valuation back to life.
Nevertheless, more fundamentally, Mould reckons it's more important for the company to prove its business model can successfully scale to grow profits and cash flow rather than just burn cash.
Just Eat offers a lot of food to consumers who will be happy with the convenience, range, and prices on offer, according to Mould.
But, investors and shareholders are less concerned about that if the positive customer experience doesn’t pay off for the company’s bottom line.
“The firm loses money, so investors will eventually want to see red ink become black and negative cashflow become positive,” he added.
“Otherwise all investors are doing is effectively subsiding consumer’s eating habits, though again that may explain why one party is happy and the other less so, at least right now.”