The Motley Fool

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

Image source: Getty Images.

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

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

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. 

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.