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The Just Eat Takeaway share price has fallen: should I buy?

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A top performer during the pandemic last year, the Just Eat Takeaway (LSE: JET) share price is down nearly 30% year-to-date and 28% over 12 months. In 2020, revenues for food delivery service companies rose by over 50%. So, what does the rest of 2021 and beyond have in store for Just Eat? Let’s take a look.

Positive trading update

Last week, Just Eat released its Q2 trading update. It said UK orders rose 61% from Q2 2020, while total orders (excluding the US) grew by 47% to 212m. The US saw a slowing growth rate compared to the half-year performance, but a 14% rise in orders highlighted how the business is capable of posting solid numbers even during the pandemic. Gross transaction value (GTV) grew by 44% in the UK, and 42% across all markets ex-US. GTV in the US remained static at €2.2bn. These results show an increase in a tough period, and with GTV for 2021 expected to be between €28 to €30bn, a rise in the Just Eat Takeaway share price could be on the cards.

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To add to this, its recent acquisition of Grubhub in the US, along with its investment in Brazilian firm iFood, shows that the business is expanding. Its iFood investment returned revenue growth of 222% for 2020. Smart investments like these from management provide me with optimism for the future of the business.

Share price risks

I briefly mentioned it above, but the slowing US growth could pose an issue. Accounting for 25% of total orders, a continuation of this stagnation could see a drop in performance for JET. Not only this, but the dip in orders, in part, could be a result of the US easing Covid restrictions at a quicker rate than Europe. As restrictions ease, people are less likely to use Just Eat’s service – an issue that could begin to occur in Europe as we see some countries relax guidelines. If orders were to fall, this would have the potential to negatively impact the Just Eat Takeaway share price.

Another issue with Just Eat is the array of competition it faces. Rival Deliveroo, which IPO’d earlier this year, saw 88% growth in orders for Q2 2021 year-on-year. Other competitors such as UberEats have also been popular during the pandemic, and its recent acquisition of Postmates for nearly $3bn shows its ambition to conquer this sector. As more businesses attempt to gain a share of the growing market, could it be that Just Eat loses business as a result?

Would I buy Just Eat?

Although there are plenty of positives, the slowdown in the US does concern me. Not only does it directly impact the performance of Just Eat, but it may also reflect what’s potentially in store for Europe in the future as restrictions ease, with fewer people perhaps using food delivery services. As such, I could see the share price falling further. Predicted rising Covid cases could drive people back to home delivery services, but increased competition could mean that JET does not see the full benefit of this. As such, I’m not going to buy Just East just yet. 

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Charlie Keough holds no position in any of the shares mentioned. The Motley Fool UK has recommended Just Eat Takeaway.com N.V. and Uber Technologies. 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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