Recent positve underlying earnings (EBITDA) from food delivery companies like Deliveroo and JustEat are unlikely to last into next year, said analysts at JPMorgan.
JPMorgan believes that, despite several profit warnings in the sector, the current consensus for orders and gross merchandise value still “appear far too high.”
Using data from Oxford Data Plan, the bank believes there has been a further deterioration in the last two months.
“The market has recently neglected worsening top line trends, welcoming improving confidence of mgmt teams to reach (some) positive EBITDA instead.”
“With the low-hanging fruit for profitability improvements (less vouchering, pooling, & higher fees) now taken, and with consumer budgets quickly deteriorating further, we see limited scope for meaningful EBITDA expansion,” said JPMorgan.
JustEat shows the highest order decline, said JPMorgan in its predictions, while Deliveroo is more resilient.
German food delivery service Delivery Hero (ETR:DHER, OTCQX:DLVHF) “remains the preferred play as we see EBITDA upside.”