As Deliveroo Drops To A Record Low, Analysts Keep The Faith

As Deliveroo Drops To A Record Low, Analysts Keep The Faith
Andrew Rummer

about 2 years ago1 min

Deliveroo shares continued their terrible run on Wednesday, setting a new record low almost 50% below the price at which it sold shares to the public in March. 

Since August, the UK food delivery firm has been a victim of investors’ shift away from unprofitable companies reliant on the promise of future growth – compounded by regulators’ efforts to give its riders greater employment rights and the British government’s reluctance to impose tighter lockdowns to tackle the Omicron coronavirus variant. 

The chart above shows how Deliveroo has significantly underperformed the wider European market since it hit the London stock exchange last year in the UK’s biggest initial public offering (IPO) in a decade.

As Carl and I pointed out in an Insight before the IPO, Deliveroo’s business model of handling its own deliveries is never going to be as profitable as linking households with restaurants who make the deliveries themselves. And, as Bloomberg Intelligence wrote this week, Deliveroo’s greater reliance on orders from dine-in chains may prove a liability if Covid restrictions ease further and people find they prefer visiting restaurants in person. 

Amid all the challenges, there’s one bright spot for Deliveroo: investment bank analysts are so far keeping the faith. Seven of the 12 analysts tracked by Bloomberg rate the shares a buy, and – as the chart below shows – they’ve maintained their average price target even as the stock has tumbled.

Deliveroo shares versus analyst price targets
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