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Can Just Eat serve up something a bit more appetising?

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While the takeaway business has settled into a pretty unshakeable slide in recent months, Just Eat has been having a tough time of it since the release of its last set of annual results. 

From an opening price of £7.79, the stock had hit an all-time high of £9.06 by mid-February, only to tumble in the aftermath of March’s full year figures.

It managed to recover to £8.87 by late July, only to once again be undone by a financial update, this time its interim statement. Since then it’s been one-way traffic, Just Eat falling to a current trading price, and 17 month low, of £5.94.

So, what was the issue with Just Eats’ July’s half year results?

On the surface it was all good. Orders rose 30% to 104.4 million, with revenue surging 45% to £358.4 million. Pre-tax profit slipped 3% to £48.1 million due to costs associated with the acquisition of Hungryhouse, though this was somewhat ameliorated by a 10% hike to its adjusted earnings to 8.6p per share.

No, what really upset investors was its investment plans, with the company announcing it was upping its spending intentions from £50 million – which the markets were already unhappy with – to £55-60 million as it tries to build its own delivery service.

And though this led full year revenue guidance to be lifted from £660-700 million to £740-770 million, underlying EBITDA forecasts were unchanged at £165-185 million.

There’s also the problem of competition. A JP Morgan report in early September suggested the company was trailing Deliveroo – which now allows eateries to sign up to its service without having to use its fleet of mopeds, a la Just Eat – and Uber Eats in recruiting restaurants to its platform.

Then, towards the end of that month, rumours emerged that the latter could buy the former, a merger that would be of significant concern to Just Eat.

In terms of next week’s Q3 update, investors will be on the lookout for any further adjustments to its FY guidance and long-term investment plans, alongside the continuation of its order and revenue growth.

Just Eat PLC has a consensus rating of ‘Buy’ alongside an average target price of £8.83.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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