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Just Eat Reports Q3 Trading Update With U.S. Behind

We expect Grubhub's fundamentals to recover in line with back-to-office trends.

Securities In This Article
Just Eat Takeaway.com NV ADR
(JTKWY)

Just Eat Takeaway reported third-quarter 2021 results with orders and general transaction value up 25% and 23% respectively. Within this, although order growth was somewhat lower than expected at the group level, Grubhub grew orders by 3% (marketplace orders down 23% while delivery orders up 23%) and management said the firm is rolling out an improvement program to refocus the business on Grubhub's strongholds. Another important consideration here is that a substantial portion of the business is in the office channel in big metro cities like New York City and Boston. Looking at subway usage rates (MTA turnstile data), third-quarter usage has been about 11 million per week versus 35 million on average precoronavirus, which could potentially explain sluggish growth rates for Grubhub. We expect Grubhub's fundamentals to recover in line with back-to-office trends. Excluding its U.S. business, marketplace orders (which restaurants deliver themselves) were up 13% (notably up 33% in Germany) in the third quarter and up 25% year to date (versus up 27% for the year in our model), while delivery orders continue to drive growth for the group (up 88% excluding Grubhub and 58% for the group). Management reiterated guidance of more than 45% order growth excluding Grubhub, fiscal 2021 adjusted EBITDA margin of negative 1% to 1.50% (EUR 360 million EBITDA loss at the midpoint) and gross transaction value of EUR 28 billion-30 billion (including Grubhub). For the company to deliver on order guidance (more than 45% excluding Grubhub), in our estimates it will have to achieve more than 30% order growth in the fourth quarter (versus a tough comparable of 56% last year). We don't anticipate significantly changing our fair value estimate for Just Eat Takeaway. We intend to refresh our model and estimates after the company's capital market day on Oct. 21. Shares trade deep in 5-star territory, presenting a material opportunity with a strong margin of safety for patient investors.

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About the Author

Ioannis Pontikis, CFA

Director of Equity Research in Europe
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Ioannis Pontikis, CFA, is a Director of Equity Research in Europe for Morningstar, where he covers European grocers and global food and beverage companies like Tesco, Unilever, Nestle, and Danone, and manages a team of eight analysts across the Financials and Consumer sectors. He also leads Morningstar’s Equity Research Valuation Committee, advancing the firm's valuation methodology through significant projects such as developing new methodologies, refining our valuation model, and enhancing the efficacy of our ratings.

Before joining Morningstar in 2017, Pontikis spent six years on the buy-side, co-managing a $100M long/short equity fund and leading teams in applying machine learning to stock and equity factor selection models. He developed the fund's valuation and risk assessment framework, achieving strong risk-adjusted performance. Prior to this, Pontikis worked at Nestle S.A. in Athens, focusing on financial reporting, budgeting, and auditing proposals to improve processes.

Pontikis research has appeared in numerous media outlets including Bloomberg, CNBC, Reuters, Guardian, Frankfurter Allgemeine Zeitung among others.

Pontikis holds a bachelor’s degree in business administration from the University of Piraeus’s and a master’s degree in accounting and finance from the London School of Economics. He also holds the Chartered Financial Analyst® designation and studying towards an advanced post-masters degree in portfolio and risk management.

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