I bought shares in Deliveroo (LSE:ROO) during the initial public offering (IPO) subscription period. The company made a portion of the shares available for retail investors to buy in. This happens occasionally, usually with companies that have a large retail following or to try and generate good PR. Unfortunately, the Deliveroo share price fell from the IPO level of 390p and hasn’t returned close to it since.
Recent good news
The IPO happened at the end of March, and so we’re now several months down the line. Even though the Deliveroo share price is currently trading around 300p, there are some positive signs starting to show.
For example, the share price has rallied from 257p a month ago. This represents a return over the past month of 17%. When I compare this to the top performing FTSE 100 stocks over this period, it comes out on top. The highest gain from a FTSE 100 stock is Bunzl, gaining 14%.
Clearly, I’m still in the red but the move higher in the Deliveroo share price is a welcome one.
More good news can be seen from the recent Q2 trading update. A key metric the company looks at is the gross transaction value (GTV) of customers who place orders. Q2 GTV grew by an impressive 76% compared to the same quarter a year ago.
One reason why I take this as very good news is that Q2 2020 was when most key markets were in lockdown. So ordering takeaways would have been in higher demand versus eating out. The fact that Q2 2021 GTV is higher (even though lockdown restrictions have eased) shows that Deliveroo have a resilient business model.
Optimism for the Deliveroo share price?
I think that the next direction for the Deliveroo share price will come after the half-year results are released in early August. The Q2 update didn’t provide much in-depth content with regards to debt levels, strategic moves, and profit/loss breakdown. As an investor, it’s this kind of information that helps me to make longer-term projections.
I think the Deliveroo share price will be affected by future announcements. For example, I think one key element is the strategy going forward on groceries. This has been an area of focus, with it recently pushing this area with supermarkets in the UK and also key players in Italy and Singapore. Has this paid dividends in H1 so far? I’ll need to wait and see.
Another point I’m looking out for is the guidance with regards to post-Covid-19 expectations. As I mentioned above, Q2 GTV growth indicates to me that the return to normality shouldn’t hinder growth significantly. However, the team at Deliveroo have much more detailed information in this regard of customer activity. So depending on how much they believe Covid has boosted business will dictate how much of a positive or negative reaction the Deliveroo share price will have.
Overall, I think that the Deliveroo share price can continue to climb. If I wasn’t already invested, I’d probably wait until the results are released in a few weeks and then take the plunge once I’ve digested it fully.
Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.
Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.
The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.
But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.
jonathansmith1 holds shares in Deliveroo Holdings. The Motley Fool UK has recommended Bunzl. 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.