150 Million Euro Investment And Global App Will Advance Markets

Key Takeaways

• Divestiture of non-core assets and strategic investments can improve net margins and revenue growth by focusing on profitable segments.
  
• Expansions in Europe and new verticals, alongside a unified global app, aim to boost customer engagement and enhance revenue potential.
  
• Significant investments in the U.K. and Germany may face challenges due to market competitiveness, impacting profitability, while strategic shifts and regulatory hurdles risk revenue concentration.

Catalysts

Operates as an online food delivery company worldwide.

• The agreement with Prosus for a recommended public offer provides Just Eat Takeaway.com with enhanced investment capabilities, technology, and expertise, which can strengthen brands and enhance operations, potentially impacting future revenue growth.
  
• The focus on streamlining operations and reducing costs through divestitures of non-core assets, such as the sale of Grubhub, enables a more concentrated investment in profitable segments, potentially improving net margins.
  
• Expanded investments of €150 million in Europe and the U.K. and Ireland for 2025 target accelerated growth in logistics coverage, supply chain expansion, and marketing, potentially impacting revenue growth and earnings in these regions.
  
• The rollout and development of a unified global app and expansion into new verticals such as grocery and electronics enhance user experience and choice, potentially impacting future revenue by increasing user engagement and order frequency.
  
• Initiatives like the Just Eat Plus loyalty program and the focus on subscription models aim to enhance customer retention and order frequency, potentially bolstering revenue growth and improving net margins over the long term.

Just Eat Takeaway.com Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Just Eat Takeaway.com's revenue will grow by 4.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from -13.7% today to 1.4% in 3 years time.
• Analysts expect earnings to reach €57.2 million (and earnings per share of €0.33) by about July 2028, up from €-488.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €145.8 million in earnings, and the most bearish expecting €1.7 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 81.4x on those 2028 earnings, up from -8.1x today. This future PE is lower than the current PE for the GB Hospitality industry at 216.6x.
• Analysts expect the number of shares outstanding to decline by 3.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.42%, as per the Simply Wall St company report.

Just Eat Takeaway.com Future Earnings Per Share Growth

Risks

• The substantial investment of €150 million planned for 2025, primarily to drive growth in the U.K. and Germany, might not yield expected returns if these markets remain highly competitive, potentially impacting adjusted EBITDA and future profitability.
  
• The competitive landscape in the U.K. is described as requiring significant investment due to widespread vouchering by competitors, which could lead to lower margins if price wars intensify in the short term, affecting earnings.
  
• Adjusted EBITDA margin improvement is modest at 1.7%, and the company’s long-term target is more than 5%, indicating that substantial cost reductions and efficiencies are needed, and failure to achieve them may impact future financial performance.
  
• The cessation of operations in New Zealand and France and the sale of U.S. assets like Grubhub suggest challenges in certain markets and potential concentration risk in remaining markets, which could impact revenue diversity.
  
• Regulatory hurdles in the Prosus merger could pose risks to deal completion, complicating strategic plans and impacting anticipated investments and operational synergies, thus affecting earnings and growth potential.

Valuation

• The analysts have a consensus price target of €20.861 for Just Eat Takeaway.com based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €30.0, and the most bearish reporting a price target of just €17.6.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €4.1 billion, earnings will come to €57.2 million, and it would be trading on a PE ratio of 81.4x, assuming you use a discount rate of 7.4%.
• Given the current share price of €20.08, the analyst price target of €20.86 is 3.7% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• 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.