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Just Eat Takeaway shares: does a 6-month drop represent a buying opportunity?

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Young woman preparing takeaway healthy food inside restaurant during Coronavirus outbreak time
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Over the last six months, no other FTSE 100 company’s share price has fallen further than Just Eat Takeaway’s (LSE:JET). Just Eat Takeaway shares are currently valued at around 6,400p, after a six-month drop of 19% and a one-year drop of 26%.

Strangely enough, this is what got me interested in taking a deeper look at the company. I was curious whether this fall in the Just Eat Takeaway share price had created an opportunity to buy.

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The reasons for the drop

The pandemic lockdowns hit some businesses hard while others thrived. For Just Eat Takeaway, it was the latter. In its 2021 first-quarter results, the company reported 96% year-on-year growth in the numbers of orders in the UK. It also reported a 695% increase in orders for delivery, which can be substantially attributed to the lockdown in the UK.

However, towards the end of last year, this explosion in orders had been accounted for when investors drove the Just Eat Takeaway’s share price to its highest point of 9,980p. Since that point, the share price has steadily fallen.

Just Eat Takeaway was then further hit, as investors began to shift capital away from tech and growth stocks earlier this year. One of Just Eat Takeaway’s major rivals, Deliveroo, launched an IPO earlier this year only to see its share price plummet.

I can see why short-term investors would consider future growth for such companies to be limited, as lockdowns ease across Europe. It’s unlikely that Just Eat Takeaway will again see the dramatic increase in orders as in its first-quarter results.

Adding to these concerns are the broader issues with the food delivery sector. Just Eat Takeaway has a number of competitors in the market and all are struggling to achieve profitability. Deliveroo, Uber Eats, and Postmates, all rivals to the company, posted losses in full-year 2020 results. Just Eat Takeaway was no different here, as the company stated a £129.5m loss in 2020.

Just Eat Takeaway shares: to buy or not to buy?

However, I think that the sell-off of Just Eat Takeaway shares has been too dramatic. After its upcoming merger with Grubhub, the company will be the largest online food delivery company outside China.

Just Eat Takeaway’s US expansion will add to its existing developed positions in the UK, Germany, Canada, and the Netherlands. In first-quarter results, total orders grew in all of these countries by more than 50%. Beyond this, the company is active in 23 countries. This provides Just Eat Takeaway shareholders with a position in a company with broad exposure to the global market.

Despite these factors, I don’t believe Just Eat Takeaway shares deserve the sell-off seen over the last six months. At the company’s current share price, I will be looking to buy to develop a long-term position.

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Ben Hargreaves holds no position in any of the shares mentioned. The Motley Fool UK has recommended Just Eat N.V. 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.

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