Every time Boris Johnson announces new lockdown restrictions, British businesses become increasingly despondent. But not Just Eat Takeaway (LSE: JET). As a result of Boris’s recent lockdown measures, the food delivery service saw its orders jump 58% in the UK. Over the whole of 2020, revenues increased over 50% and its shares outperformed the FTSE 100. However, considering the same company reported gargantuan losses in the years leading up to the pandemic, can Just Eat stock maintain its recent performance once the pandemic is over?
Whilst those in the UK are only exposed to Just Eat’s British network, it’s worth noting the expansive scale of the Danish company. Just Eat currently operates in 28 countries, often under a different moniker; the company trades as Menulog in Australia, 10bis in Israel and SkipTheDishes in Canada. Just Eat is much more than a European delivery service.
Since its IPO in late 2016, Just Eat’s share price has increased steadily – climbing around 350% to its peak in mid 2020. This in itself suggests that investors are increasing their confidence in Just Eat.
Perhaps what’s most exciting about Just Eat is its aggressive competitive strategy. In the UK, Just Eat has a marginally majority market share in its field: 37% compared to Deliveroo’s 36% and Uber Eats’ 26%. Just Eat has thus been feeling the pressure from its competitors, and is responding aggressively.
In January 2021, Just Eat Chief Executive Jitse Groen said the company plans to “go all out” in London, effectively pledging war on Deliveroo and Uber Eats. “We do whatever we can to make life very, very, very complicated for the competitors,” Groen said. “It’s either all or it is nothing and we are going to go for all in the UK.”
These words should not be disregarded as an empty threat, either. In 2019, Just Eat out-hustled Uber to buy Chicago-based delivery service Grubhub. Uber offered $6.5 billion but Just Eat raised its offer to $7.3 billion. “Matt and I are the two remaining food delivery veterans in the sector,” Groen said of Grubhub CEO Matt Maloney.
Sadly, the costly merger resulted in Just Eat’s losses surging from £27 million to £158 million within one year, causing its share price to plunge. This is where I have reservations about the company – whilst revenue has been increasing, Just Eat’s losses are too.
Looking ahead, Just Eat’s UK growth might struggle to match 2020’s if the pandemic comes to an end. However, the company also experienced solid growth in countries where lockdown restrictions weren’t as long or as burdensome as that of the UK’s. Menulog saw 166% growth in orders over the year and the ‘rest of the world’ grew 47%.
Over the past week, Just Eat’s stock price has been tumbling, positioning itself further from its October 2020 highs and even under its pre-pandemic price. Considering it for my own portfolio, I’d expect upside potential in Just Eat’s stock price as 2021 plays out. Looking further ahead, I have faith that Groen’s aggressive strategy will pay off. However, whilst losses from Grubhub should also be recovered as time goes on, Just Eat’s prior losses are too troubling for me.
