Why is the Just Eat share price falling? And should I buy?

The Just Eat share price is dipping again after a lacklustre performance in 2021. I’m wondering if there’s a buying opportunity here.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Just Eat Takeaway (LSE: JET) is the biggest early faller on the FTSE 100 on Friday, at least at the time of writing. The Just Eat share price is down 4.5%, with the second worst performer, Sainsbury, off by 1.7%. On its own, that’s the kind of fluctuation that can happen any day, without any real meaning.

But for Just Eat, it continues what has so far been a disappointing 2021. When the pandemic crash hit in 2020, Just Eat was one of the first to post a recovery. Lockdown meant no eating out, less going to the shops, and a boost for takeaway food services.

But as the bulk of FTSE 100 started to turn upwards later in the year, Just Eat shares headed in the opposite direction. The pandemic effect on its share price, it seems, was more transient than for others in the home deliveries business.

Take Tesco, for example. I was always convinced the supermarket giant would enjoy long-term benefits from the forced rise in online shopping. Most people just hadn’t got round to trying it, and many that have are now going to stick with it.

Is takeaway delivery different? It is for me. Tesco shopping’s easy. I know what I want, always order same stuff, and it turns up at the door. If I want takeaway food, I rarely know what I fancy until I’ve headed out, examined menus, and taken in the sights and smells. And if that doesn’t put me off, I might buy something.

No seismic change?

The Just Eat share price fall though, might not be down to any short-term changes in home dining habits. No, I think there’s something else that might be happening. Yes, I reckon investors really did switch to Just Eat as one of the stocks they thought would do well during the pandemic. But now, maybe they’re simply getting back to seeing it as a company that needs to be valued on its fundamentals. You know, like they all do, in the long term.

For Tesco, that’s easy. The fundamentals are solid, the profit’s there, and the dividends are being paid. But what about Just Eat? Well, first-half results released on 17 August showed a 52% jump in revenue, to €2.6bn. That’s impressive. But it still resulted in an EBITDA loss of €190m. The company reckons it “has reached the peak of its absolute losses in the first half of 2021” though.

Just Eat share price valuation

So that’s good, and it suggests we should see losses starting to narrow and the company heading towards profitability. But that does make it very hard to work out a fair level for the Just Eat share price right now. It exhibits the very same risk as all early-phase unprofitable growth stocks. If you get the price wrong in the early days, you could pay too much for it and end up losing. I’ve seen that happen many times.

Now, that doesn’t mean I have a negative outlook towards Just Eat stock. No, on the contrary, part of me feels we could see some very nice share price gains in the coming years. It’s just not one for an old investor like me, who much prefers the safe reliability of steady dividends.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Just Eat Takeaway.com N.V. and Tesco. 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.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »