Company Reports

Just Eat Takeaway reported a first-quarter trading update, with gross transaction value, or GTV, down 2% in constant currency. Management reiterated its outlook for 2024 adjusted EBITDA to be around EUR 450 million, versus EUR 449 million in our model, and constant-currency GTV growth excluding North America in the range of 2% to 6% year on year, versus 3.4% in our model (down 0.7% including North America in our model). The company also expects free cash flow to remain comfortably positive, especially given the expectation for higher profitability, which is in line with our expectations. Just Eat Takeaway has completed the EUR 150 million share buyback program initiated in April and is in the process of completing a second buyback program, having repurchased cumulatively 8.9% of issued shares. Regionally, volumes were particularly disappointing in Southern Europe and Australia (down 16%) as well as North America (down 12%), with volumes in Northern Europe affected by the weak macro environment.

Just Eat Takeaway is the market leader in the majority of its markets, excluding the United States, and is well positioned to benefit from the structural trend of digitization of food delivery orders, in our opinion.

Just Eat Takeaway reported fiscal 2023 full-year results, in line with the fourth-quarter trading update released on Feb. 5, with gross transaction value, or GTV, down 4% in constant currency. 2023 adjusted EBITDA came in at EUR 324 million, as expected, driven primarily by strong performance in the UK and Ireland segment, compensating lower-than-expected Northern Europe profitability (still the crown jewel of the group at 4.8% adjusted EBITDA margins as a percentage of GMV). Management introduced its outlook for 2024 adjusted EBITDA to be around EUR 450 million, versus EUR 468 million in our model, and constant-currency GTV growth excluding North America in the range of 2% to 6% year on year, versus 7.7% in our model (up 3.5% including North America in our model). Second-half free cash flow was positive versus "approximately breakeven" guidance, and the company expects it to remain comfortably positive, especially given the expectation for higher profitability. The company has completed the EUR 150 million share buyback program initiated in April and is in the process of completing a second buyback program, having repurchased cumulatively 7.3% of issued shares, with a remaining maximum value to be repurchased of EUR 80 million.

Just Eat Takeaway is the market leader in the majority of its markets, excluding the United States, and is well positioned to benefit from the structural trend of digitization of food delivery orders, in our opinion.

Just Eat Takeaway's fourth-quarter total orders fell 7% year over year (versus down 12% in the first half and 9% for the year) and gross transaction value declined 3% (versus down 7% in the half and 4% for the year in constant currency). The main detractors remain the Southern Europe, Australia, and New Zealand markets, with orders down 16% year over year, and the North America market, down 13%. GTV improved in the important Northern Europe market (up 4% year on year versus 2% in the half and 3% for the year) and the U.K. and Ireland market (GTV up 5% versus down 3% in the half and 3% for the year), building on the positive momentum in the second and third quarters.

Just Eat Takeaway's third-quarter total orders fell 7% year over year (versus down 12% in the half and down 10% year to date) and gross transaction value, or GTV, declined 7% (versus down 7% in the half and down 7% year to date). The Southern Europe, Australia, and New Zealand markets, and North America remain the main detractors, with orders down 13% year on year in both regions. Positively, GTV improved in the important Northern Europe market—up 6% year on year versus 2% in the half—and in the U.K. and Ireland market (GTV up 5% versus down 3% in the first half), building on the positive momentum in the second quarter (GTV rose 3% in both Northern Europe and the U.K. and Ireland). Management raised the outlook for 2023 adjusted EBITDA to EUR 310 million versus EUR 275 million before and now has top-line guidance of negative 4%, at the low end of the previous guidance range (GTV at constant currency). On free cash flow, management also upgraded guidance as it now sees free cash flow breaking even in the second half of the year and being positive thereafter, versus breakeven by mid-2024. Given the positive developments in profitability and cash flow, the firm announced a fresh share buyback program, of up to EUR 150 million or about 6% of market cap.

Just Eat Takeaway reported half-year 2023 results with total orders down 12% and gross transaction value down 7%, broadly in line with expectations. The Southern Europe, Australia, and New Zealand market, and Grubhub continue to be the main detractors with orders down 17% and 15% respectively. On a positive note, GTV and revenue improved in the important Northern Europe market (GTV up 2%, revenue up 10%) and in the U.K. and Ireland market (GTV down 3%, revenue down 4%) in the first half while trends are positive in the second quarter versus 2022 (GTV was up 3% in both Northern Europe and the U.K. and Ireland). Half-year adjusted EBITDA improved to EUR 143 million (EUR 277 million change versus last year) driven by delivery efficiencies and savings (Grubhub's restructuring resulted in $30 million run-rate savings from 2024). On guidance, management confirmed its outlook for fiscal 2023 adjusted EBITDA of EUR 275 million and also top-line guidance (GTV growth from negative 4% to 2% with growth skewed toward the end of the year given soft comps from 2022). Top-line guidance implies down 1% to up 11% GTV growth in the second half. We think conservative EBITDA guidance allows for flexibility in much-needed demand-generating marketing investments in the second half, investments that could render the midpoint of top-line guidance achievable. Free cash flow before changes in working capital improved to negative EUR 78 million (from negative EUR 407 million a year ago) or negative EUR 16 million excluding one-offs and exceptionals. Management also expects free cash flow (excluding working capital movements) to turn positive in mid-2024, which we think is achievable given profitability improvements and cost controls.

Just Eat Takeaway reported a first-quarter 2023 trading update with total orders down 14% and gross transaction value down 8% (down 8% at constant currency), lower than expectations. Southern Europe, Australia, and New Zealand continue to be the main detractors with orders and GTV down 18%, but top-line performance was disappointing across the board (Northern Europe GTV flat; North America GTV down 11% aided by currency, down 14% at constant currency; U.K. and Ireland down 6%, down 1% at constant currency). Order declines were broadly expected due to tough comparables and a lower number of low-contribution orders, while lower GTV declines are the result of higher average order values (restaurants passing on inflation and Just Eat reducing the number of low-value orders) as well as positive currency effects. On guidance, management upgraded its outlook for fiscal 2023 adjusted EBITDA to EUR 275 million from EUR 225 million, a number that includes "investments in food and nonfood adjacencies and wage costs inflation and takes into account the uncertain macroeconomic environment" and introduced top-line guidance (GTV growth from negative 4% to 2% with growth skewed toward the end of the year given soft comps from last year). Management also expects free cash flow (excluding working capital movements) to turn positive in mid-2024, which we think is achievable given recent profitability improvements and cost controls. Last, the company announced the initiation of a share buyback program of up to EUR 150 million or around 4.4% of its current market cap, which we think is appropriate given the level of undervaluation and good liquidity/cash flow visibility.

Just Eat Takeaway reported fiscal 2022 results with total orders down 9%, and gross transaction value, or GTV, flat (down 5% at constant currency) broadly in line with our estimates as we reported back in January when the company released its fourth-quarter trading update. Regionally, Southern Europe, Australia, and New Zealand was the main detractor with orders and GTV down 15% and 8%, respectively, which was partially offset by the rest of the group (Northern Europe GTV up 3%, North America GTV up 1% aided by currency, down 9% at constant currency, U.K. and Ireland down 1%, down 2% at constant currency). Order declines were broadly expected due to tough comparables and a lower number of low-contribution orders, while GTV growth is the product of higher average order values (restaurants passing on inflation and Just Eat reducing the number of low-value orders) as well as positive currency effects. On guidance, management reiterated its outlook for fiscal 2023 (no specific GTV or order growth guidance was given, but management said growth should be skewed toward the end of the year given soft comps from last year) with adjusted EBITDA expected to be about EUR 225 million, a number that includes "investments in food and nonfood adjacencies and wage costs inflation, and takes into account the uncertain macroeconomic environment." Regarding top-line growth, on the call, management said that it feels comfortable with consensus (FactSet consensus points to about 5% revenue growth in fiscal 2023). Although we do expect to adjust our 2023 top-line growth (revenue growth to 5% versus 15% in our model) and EBITDA (to EUR 225 million versus EUR 3 million in our model) estimates, we don't expect to materially change our EUR 81 fair value estimate as our midterm and long-term value drivers remain intact. Shares trade deep in the 5-star territory.

Just Eat Takeaway reported a fourth-quarter trading update with total orders down 12%, and gross transaction value down 2% (down 6% at constant currency) broadly in line with our estimates (EUR 28.22 billion GTV versus EUR 28.35 billion in our model). Similar to third-quarter trends Southern Europe, Australia, and New Zealand; and the U.K. and Ireland were the main detractors with GTV down 15% and 3% respectively, which was partially offset by the rest of the group (Northern Europe up 3%, North America down 2% aided by currency, down 11% at constant currency). Order declines were broadly expected due to tough comparables and a lower number of low-contribution orders, while GTV growth is the product of higher average order values (restaurants passing on inflation and Just Eat reducing the number of low-value orders) as well as positive currency effects. On guidance, management introduced a fresh outlook for fiscal 2023 (no specific GTV or order growth guidance was given, but management said growth should be skewed toward the end of the year given soft comps from last year) with adjusted EBITDA expected to be about EUR 225 million, a number that includes "investments in food and nonfood adjacencies and wage costs inflation, and takes into account the uncertain macroeconomic environment." Given the significant beat on actual and guided adjusted EBITDA (EUR 16 million in fiscal 2022 versus EUR 130 million EBITDA losses for FactSet consensus and guidance for EUR 225 million in 2023 versus EUR 130 million for FactSet consensus), shares reacted positively, rising as high as 15% at the of time of writing. With the iFood sale now complete, our expected fair value estimate reduction for Just Eat by about 5% to reflect the lower sale price (EUR 1.8 billion versus EUR 2.6 billion in our sum-of-the-parts analysis) is offset by time value of money since our last model update. Therefore, we maintain our EUR 81 fair value estimate and narrow moat rating for Just Eat Takeaway.

Just Eat Takeaway is the market leader in the majority of its markets, excluding the U.S., and is well positioned, in our opinion, to benefit from the structural trend of digitization of food delivery orders.

On Nov. 3, the New York City Council introduced a bill that will exempt food delivery companies from the cap on fees it charges to a restaurant if the former offers the restaurant the option to obtain delivery services for a fee consistent with all fee caps, and the option to be listed on the platform for a fee consistent with the caps on delivery and transaction fees. According to an announcement released by the Chamber of Progress, New York's amendment follows on similar changes in San Francisco and Chicago. As a reminder, in July 2022, the San Francisco Board of Directors created an amendment to the original legislation for food delivery companies that offer 15% pricing as an option for restaurants, with additional charges for marketing and other promotional activities. In other words, restaurants that are willing to pay more for additional services such as advertising, search engine optimization, and credit card processing will be allowed to do so, in which case the final take rate for the food delivery platform could be similar to the one they are charging restaurants in states without a permanent fee cap. Although the timing of implementation of this amendment is uncertain, we note that from our food delivery coverage, Just Eat Takeaway, through GrubHub, is affected the most, given its significant exposure and relative size in the area. According to the company, in the first half of 2022, fee cap headwinds in North America amounted to EUR 73 million at the EBITDA level (the majority of which was in New York). Considering that we expect the group's EBITDA to be barely positive in fiscal 2023, the news of the amendment on permanent fee caps in New York is material and positive for shares, which were up about 15% in intraday trading. Given the uncertainty around the timing of implementation and our contrarian expectations that fee caps would likely fall off by 2024 (base case), we don't expect to change our fair value estimate for Just Eat Takeaway.

Just Eat Takeaway reported third-quarter 2022 results with total orders down 11%, and gross transaction value up 2% (down 5% at constant currency). Southern Europe and the U.K. and Ireland were the main detractors with GTV down 10% and 5% respectively, which was more than offset by the rest of the group (Northern Europe up 6%, North America up 6% aided by currency, down 8% at constant currency). Order declines were broadly expected due to tough comparables (coronavirus lockdowns in the previous year and a challenging macroeconomic environment) and a lower number of low contribution orders, while GTV growth is the product of higher average order values (restaurants passing on inflation and Just Eat reducing the number of low-value orders) as well as positive currency effects. Third-quarter adjusted EBITDA was positive, according to the company, which was a nice surprise. More importantly, on guidance, management reiterated its recently updated outlook for fiscal 2022 (GTV growing by low single digits and positive adjusted EBITDA in the second half of 2022). Management also expects to reach positive adjusted EBITDA in 2023 at the group level (versus slightly positive in our model) and confirmed long-term targets (in excess of EUR 30 billion of GTV added over the next five years and long-term group adjusted EBITDA margin in excess of 5% of GTV versus EUR 19 billion by 2026 and 4.3% by 2030 in our model). We maintain our EUR 81 fair value estimate and narrow moat rating for Just Eat. Once the iFood deal closes (expected to be completed shortly after the upcoming extraordinary general meeting on Nov. 18), we expect to reduce our fair value estimate by about 5% to reflect the lower deal price (EUR 1.8 billion versus EUR 2.6 billion in our sum-of-the-parts analysis).

Just Eat Takeaway announced on Aug. 19 that it has entered into an agreement to sell its 33% stake in iFood for a total cash consideration of up to EUR 1.8 billion (EUR 1.5 billion in cash and as much as EUR 300 million contingent on the performance of the business over the next 12 months). The transaction is subject to approval at the company's general meeting in the fourth quarter. JET reiterated its previously given guidance and its intention to partially or fully sell Grubhub.

Just Eat Takeaway reported half-year 2022 results with total orders down 7%, flat gross transaction value, and revenue up 1%. North America was the main detractor with revenue down 5%, which was more than offset by European operations (Northern Europe up 6%, U.K. and Ireland up 10%, Southern Europe and ANZ up 6%). Adjusted EBITDA improved at the group level to minus EUR 134 million from minus EUR 189 million a year ago. More importantly, on guidance, management reiterated its outlook for fiscal 2022 (GTV growing by midsingle digits and adjusted EBITDA margin in the range of minus 0.5% to minus 0.7% of GTV versus 0.5% and minus 0.7% in our model respectively). Management also expects to reach positive adjusted EBITDA in 2023 at the group level (versus slightly positive in our model) and confirms long-term targets (in excess of EUR 30 billion of GTV added over the next five years and long-term group adjusted EBITDA margin in excess of 5% of GTV versus EUR 19 billion by 2026 and 4.3% by 2030 in our model). We maintain our EUR 81 fair value estimate for Just Eat and narrow moat rating. Guidance implies about 10% GTV growth and minus 0.3% of GTV adjusted EBITDA margin in the second half, which although higher than our estimates we view as achievable.

Just Eat Takeaway is the market leader in the majority of its markets—excluding the U.S.— and is well positioned, in our opinion, to benefit from the structural trend of increasing digitization of food delivery orders.

As a result of recent macroeconomic developments, such as geopolitical uncertainty and pandemic-related supply constraints causing inflationary pressures, which tend to dampen consumer confidence and discretionary spending, we reduce our top-line growth estimates for European food delivery companies. In addition, we revise our cost of capital forecasts upwards, as a result of increased share price volatility over the last year, which reflects industry-wide headwinds and a tightening interest rate and valuation environment, as well as a high cost of debt. Significantly reduced values but unchanged star ratings arise from the preceding factors (all three names are in the 5-star territory). We continue to expect material secular growth opportunities in food delivery and its adjacent markets (such as supermarket convenience delivery), principally driven by the steady shift from phone-based to online meal ordering. As a result of pandemic-driven lockdowns, a much greater number of new clients have chosen to utilize meal delivery services. We anticipate that cohorts acquired during the pandemic will display weaker spending habits than historical generations, which, combined with a lack of strength in discretionary spending, will result in a noticeable slowing of order growth in the medium term (2022-2024, we observe early signs of this slowdown in google search trends data, mobile app downloads, website traffic numbers and restaurant dining activity trends). In our coverage of European food delivery companies (Just Eat Takeaway, Delivery Hero, and Deliveroo), we expect Gross Transaction Value or GTV growth to underperform management forecasts in fiscal 2022, although we feel this is already reflected in current prices. Our fair value estimates for Just Eat Takeaway, Delivery Hero, and Deliveroo decrease to EUR 81, EUR 88, and GBp 215 per share, from EUR 126, EUR 97 and GBp 350 per share, respectively. Just Eat Takeaway remains our top pick.

On July 6, Just Eat Takeaway announced a business partnership with Amazon in the United States allowing Amazon Prime members to join up for a free Grubhub Plus subscription for one year (free delivery from selected restaurants plus member-only perks and rewards). The business anticipates the relationship will increase membership in Grubhub Plus while having a neutral impact on Grubhub's profits and cash flow in fiscal 2022, and a positive impact beginning in fiscal 2023. Amazon will obtain warrants over 2% of Grubhub's fully diluted common equity and up to an additional 13% of Grubhub's common equity in conjunction with the commercial agreement. The second tranche of warrant vests largely depend on the number of new customers obtained as a result of this relationship, but the exercise price was not specified in the media announcement (formula-based price). We retain our EUR 126 fair value estimate and narrow moat rating for Just Eat. The share price is in 5-star territory. Just Eat is our top pick in the food delivery segment.

Just Eat Takeaway reported first-quarter orders and gross transaction value, or GTV, for the group down 1% and up 4% respectively. The U.K. and Ireland segment had flat orders with growth continuing in the most profitable markets (Northern Europe up 4% and 6% respectively) despite tough comparables. Management downgraded fiscal 2022 GTV growth guidance to midsingle digits from midteens previously or GTV of about EUR 29.5 billion versus EUR 32.4 billion implied by previous guidance and EUR 32.3 billion in our model. At the same time, the firm now guides to positive adjusted EBITDA for fiscal 2023 (in line with our model for adjusted EBITDA at plus EUR 59 million in fiscal 2023) and lower fiscal 2022 loss at the EBITDA level of 0.5% to 0.6% from 0.6% to 0.8% previously or EUR 178 million EBITDA loss at the midpoint versus EUR 227 million loss implied by previous guidance and EUR 272 million loss in our model. The new guidance is a clear change of focus by management toward profitability versus market share gains/top-line growth previously. The firm cited tough comps, higher-than-normal churn levels, and increased focus on profitability (fewer low-value orders) as the main reasons behind disappointing order growth. GTV per order grew by 5% in the first quarter, reflecting fewer low-value orders, higher delivery fees (on an upward trend industrywide according to management), and inflation at the restaurant level (which is passed on to diners as take-rates are a percentage of order value). On the negative side, Just Eat Takeaway stopped disclosing a breakdown of orders between marketplace and delivery orders, which we view as problematic because the distinction supports significantly different unit economics. We don't anticipate significantly changing our fair value estimate for Just Eat Takeaway as our long-term assumptions remain intact. Shares trade deep in 5-star territory, presenting a material opportunity with a strong margin of safety for patient investors.

Just Eat Takeaway released its fiscal 2021 results, with revenue up 33% at EUR 5.3 billion, in line with our estimates but ahead of company-compiled consensus (EUR 5.1 billion). GMV and order growth had already been reported in the fourth-quarter trading update in January. Adjusted EBITDA loss of EUR 350 million was ahead of our estimate at EUR 379 million and in line with consensus and guidance. Regionally, adjusted EBITDA in North America was a positive surprise (negative EUR 28 million versus negative EUR 44 million in our model) with permanent fee caps remaining in place in major cities such as New York and San Francisco. In Canada, the British Columbia cap was extended until end-2022. The above had a significant impact on revenue of EUR 192 million, according to the company. Just Eat Takeaway has a strong balance sheet with about EUR 1.3 billion in cash and significant optionality from its iFood stake (worth EUR 3.5 billion in our estimates), which will further boost the company's cash position in case of a disposal (management is open to selling its stake). The firm also announced two market exits, Norway and Portugal, with a negligible impact on revenue and EUR 10 million combined losses, which we welcome as another signal of gradual market repair in the food delivery segment. Management said the company is rapidly progressing toward profitability and reiterated guidance of midteens GTV growth for the group in fiscal 2022 (versus 15% in our model), and fiscal 2022 adjusted EBITDA margin of negative 0.6%-0.8% of GTV (versus negative 0.8% in our model). Overall, given this largely in-line print, reiterated guidance and focus on profitability as well as a strong balance sheet with plenty of optionality (iFood stake), we don't anticipate changing our fair value estimate for Just Eat Takeaway, and we maintain our narrow moat rating. Shares trade deep in 5-star territory, presenting a material opportunity with a strong margin of safety for patient investors.