Shares in FTSE 100 stock Just Eat Takeaway (LSE: JET) were on the front foot this morning as the company revealed its latest set of full-year numbers to the market. Will this be enough to arrest the slide in the share price? I’m not so sure.
An “exceptional” year
Now, don’t get me wrong — today’s results were certainly striking. Revenue jumped 54% to €2.4bn in 2020. In addition to this, JET also reported adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of €256 million in the previous year. This represents a jump of 18% on 2019’s €217 million. Taken collectively, these numbers go some way to showing just how quickly the company (and sector) is growing.
As good as these results are, I don’t think we should be all that surprised. As CEO Jitse Groen reflected this morning, last year was “exceptional” for Just Eat Takeaway. With everyone confined to their homes due to lockdown restrictions, it was inevitable that relatively cheap treats like takeaways would prove popular. Accordingly, JET processed 588m orders in 2020 — up a colossal 42% from 2019.
What’s perhaps more surprising is that this performance hasn’t really been reflected in the share price. Since hitting a peak in October last year, shares in Just Eat Takeaway have been on the slide.
So, will today mark the start of a sustained recovery?
Reasons to be bullish
Based on more recent trading, it’s certainly possible. Today, the FTSE 100 company said it expects “further acceleration” of order growth in 2021. This would appear reasonable given that UK orders were up 88% over January and February. Delivery orders also soared more than 600% compared to the same period in 2020.
Shares in JETS could also be boosted by the eventual sale of the firm’s 33% stake in fast-growing Brazilian food delivery startup iFood. The company has already received several bids from rivals — the best so far being €2.3bn.
Having said this, an investment in JET isn’t without risk.
Buyer beware
Arguably the biggest hole in the investment case for me is the fact that the company still doesn’t make a profit. A loss of €151m was recorded for 2020. While a lot of this is the result of the costs incurred from the Just Eat and Takeaway.com merger, things could get worse before they get better.
The FTSE 100 member may be market leader in the UK right now, but maintaining this position will still require significant ongoing investment, the spoils from which will only be delivered much further down the road. That might be acceptable for long-term investors but I don’t think anyone should ignore the opportunity cost of holding the stock in the meantime. The forthcoming listing of one of its biggest rivals won’t help matters.
It may also be argued that Just Eat Takeaway’s purple patch could end once lockdown restrictions are lifted and we’re allowed to eat in restaurants once more. Takeaways will always be popular, of course, but a slowing of momentum seems inevitable if/when the good weather arrives and people are permitted to socialise freely again.
Bottom line
As encouraging as today’s share price rise in Just Eat Takeaway is, I don’t think investors should get carried away. For me, there are far higher quality companies generating consistent profits elsewhere in the market more deserving of my capital. Only the patient need apply here, I feel.
