The Just Eat Takeaway share price has plunged! Here’s what I’d do about the FTSE 100 stock now

The Just Eat Takeaway share price has plunged on news that it’s acquiring GrubHub. But is that necessarily a long-term negative for the food delivery app? 

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Just a few days ago the FTSE 100 food delivery provider Just Eat Takeaway (LSE: JET) touched impressive highs. But the rise in the JET share price to £90+ levels was short-lived. In a span of days it has fallen by more than 18%. It’s now at levels last seen during the stock market crash, triggered by JET’s takeover of the US-based Grubhub

It’s not unusual for the acquiring company’s share price to fall on such announcements. The reverse is true for the acquired company. Both the Just Eat Takeaway share price and GrubHub’s share price trends are proof of this. However, the $7.3bn buy needn’t be a long-term negative for JET’s share price. It’s true that an acquisition always carries the risk of integration challenges. Corporate history is strewn with examples of well-meant deals that went awry. This risk is particularly high for JET, which itself was very recently formed through the merger of UK’s Just Eat and the Dutch Takeaway.com

Consolidation in the food-delivery industry

But it’s also true that this is a time for consolidation in the food delivery industry. The industry is still young. Takeaway.com was formed only two decades ago, for instance. There has been a proliferation of these services in the years since. Gaining market share, then, became a key means to ensure stability in revenues and ensure future growth in an otherwise fickle consumer market. The fact that GrubHub almost got acquired by Uber, shows the severity of competition among the top players in the industry now.

Much long-term potential 

Besides just expanding in size, JET now has access to the big and growing US markets through GrubHub, where it hadn’t operated so far. I liked the long-term potential for the JET share price because of its business in any case. The latest acquisition has only added to its attractiveness for me. Online markets are changing the face of business, and the likes of JET are leading the changes in the food delivery industry. As consumers, many of us have first-hand experience of the convenience that apps like JET and its rival Deliveroo offer. I’m sure if we were skeptical earlier, the restrictions imposed by lockdowns have turned at least some of us into staunch converts.  

Verdict for the Just Eat Takeaway share price

This is all very good. But its financials can’t be ignored. JET’s a loss-making company, which isn’t surprising either. It’s the price of gaining market share in a competitive market. The company’s debt-to-equity ratio has also been on the rise per Financial Times data. I’d keep an eye on this ratio if JET continues to feed its appetite for acquisitions.  

Much as I like to invest in profit-making companies, JET’s an exception because of the nature of the industry. It seems to be on the right path, which gives me confidence. It’s gaining market share, which increases its chances for success. I think it would be worthwhile to buy at the current JET share price, when it’s still subdued. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

3 simple moves to try and grow value in an ISA, without putting in more money

Christopher Ruane details a trio of moves he'd make to try and improve his Stocks and Shares ISA valuation without…

Read more »

Investing Articles

My best stock to buy for 2024’s smashing the market! Is there more to come?

It's a case of 'so far, so good' for our writer's pick for the best stock to buy for 2024.…

Read more »

Investing Articles

2 fantastic passive income stocks I’d feel confident going all in on

Diversification's considered crucial to safeguard a portfolio of stocks. But if I could choose only two, it would be these…

Read more »

Investing Articles

Best British growth stocks to consider buying in October

We asked our freelance writers to reveal the top growth stocks they’d buy in October, which included three 'Fire' recs!

Read more »

Investing Articles

What’s the dividend forecast for BT shares? Here’s what the experts say

Have I made a mistake in not buying BT shares for the dividend, even while watching the share price dip…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

These might just be the cheapest FTSE 100 shares for me to buy next

There are many ways we can consider which are the best UK shares to buy at any time. I'm seeing…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

How I’d invest for a second income using my £20k ISA allowance

Here's a three-strand investing strategy and some stock ideas for building a second income portfolio starting with £20k in an…

Read more »

Buffett at the BRK AGM
Investing Articles

The Warren Buffett investment with 1,810% earnings growth

When Warren Buffett first started buying Berkshire Hathaway Energy in 2000, it was making $122m a year. In 2023, it…

Read more »