Expanding Multi Vertical Adoption And Rising Subscription Penetration Will Drive Strong Future Momentum

Catalysts

About Talabat Holding

Talabat Holding operates a leading online food, grocery and retail delivery ecosystem across eight markets in the GCC and wider MENA region.

What are the underlying business or industry changes driving this perspective?

• Rapid expansion of the addressable online food and grocery market, with per capita ordering still a fraction of leading delivery regions, provides a long multi year runway for volume growth that can compound GMV and revenue well ahead of current expectations.
• Increasing multi vertical adoption, with more than one third of active customers already ordering across food, grocery and retail and generating over 70 percent of GMV, should structurally lift order frequency, basket size and long term revenue visibility.
• Scaling of higher take rate tMart dark stores and improving AdTech monetization, where margins are already among the highest in the industry and are targeted to almost double over time, supports a mix shift toward structurally higher gross profit and EBITDA margins.
• Rising penetration of talabat pro, now contributing close to half of GMV and being rolled out with richer cross category benefits, is likely to deepen customer loyalty, reduce churn and enhance earnings quality through recurring subscription revenue.
• Strengthening regulatory focus on fair competition and curbing predatory pricing in key GCC markets can tame irrational discounting from newer entrants. This can allow Talabat’s scale, logistics efficiency and partner funded promotions to translate more directly into sustainable net margins and earnings growth.

Assumptions

This narrative explores a more optimistic perspective on Talabat Holding compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Talabat Holding's revenue will grow by 20.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 12.7% today to 12.9% in 3 years time.
• The bullish analysts expect earnings to reach $823.5 million (and earnings per share of $0.03) by about December 2028, up from $467.2 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $479.5 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 28.9x on those 2028 earnings, up from 13.7x today. This future PE is greater than the current PE for the AE Hospitality industry at 13.7x.
• The bullish analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 20.47%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Escalating competitive pressure from Keeta and other new entrants that rely on aggressive discounting and subsidies could force Talabat to increase promotions and lower effective take rates to defend market share, which would compress revenue growth and reduce net margins over time.
• A continued mix shift toward lower margin grocery and retail verticals and tMart scale up, if not offset by higher pricing power or efficiency gains, may structurally cap or erode gross profit margins and limit long term earnings expansion despite healthy GMV growth.
• Increasing regulatory scrutiny across GCC markets, particularly around predatory pricing, rider conditions and sector specific rules, could constrain promotional flexibility, raise compliance and labor costs and lead to tighter pricing levers, weighing on both revenue and net income.
• Rising logistics and rider related costs needed to sustain a fleet that has already grown by more than one third, combined with potential future incentives to retain drivers, risk outpacing delivery fee and subscription revenue growth, putting sustained pressure on EBITDA margins and free cash flow.
• Strategic execution risks tied to heavy investment in AI, AdTech, talabat pro and multi vertical expansion mean that if personalization, advertising monetization or cross category engagement underperform expectations, the return on these initiatives could disappoint, limiting operating leverage and long term earnings growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Talabat Holding is AED2.15, which represents up to two standard deviations above the consensus price target of AED1.65. This valuation is based on what can be assumed as the expectations of Talabat Holding's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of AED2.15, and the most bearish reporting a price target of just AED1.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $6.4 billion, earnings will come to $823.5 million, and it would be trading on a PE ratio of 28.9x, assuming you use a discount rate of 20.5%.
  
• Given the current share price of AED1.01, the analyst price target of AED2.15 is 53.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.