Deliveroo PLC (LSE:ROO)’s underlying position remains something of a mystery in the leading up to its third-quarter earnings call on Friday October 21.
The London-listed food delivery disruptor has been fairly tightlipped, but there’s good reason to suspect that not all is well.
Shares are down over 60% as the company battles with reduced demand on a post-pandemic hangover.
Furthermore, the gig economy is facing a regulatory reckoning in the US, but there hasn’t been a dearth of court cases in the UK either.
Danni Nelson, financial analyst at AJ Bell, noted that concerns about the gig worker model among institutional investors contributed to Deliveroo’s disastrous IPO last year.
“Changing workers’ classification is likely to cost companies more, and right now they’ll find it hard to pass those additional costs onto their customers who are already thinking hard about their daily spend,” said Nelson.
But Deliveroo has an ace up its sleeve with its new ‘The Deliveroo Media and Ecommerce’ platform, a fancy title for in-app advertisements.
“Advertising revenue is a small part of Deliveroo’s current model but a big opportunity and a lever the company can pull to increase net revenue,” chief operating officer Eric French said back in June.
Next Friday’s earnings should give us an idea of the lever’s true potential.
As for broader guidance, there’s little word emerging from the equities analysts, likely due to the fact that Deliveroo’s financial position remains highly speculative.
The company’s medium-term gross transaction value (GTV) growth rate is expected to be in the range of 20–25% per annum.