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Just Eat: Deterioration in Orders Continues, but Trends Improving With Guidance Upgrade

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

Just Eat Takeaway TKWY 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.

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.

We expect to adjust our midterm growth outlook (lower) and EBITDA estimates (higher) after we digest results, but we don’t expect to materially change our EUR 81 fair value estimate as our long-term value drivers remain intact. Shares trade deep in 5-star territory.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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Ioannis Pontikis

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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