DHER: Market Expansions And Execution Will Drive Upside As Competition Intensifies

Key Takeaways

• Diversified market exposure and a strong multi-vertical platform drive sustained growth, increased user engagement, and resilience against competition.
  
• Technology integration and new service models enhance operational efficiency, boost customer value, and support long-term margin and earnings improvement.
  
• Regulatory pressures, currency volatility, rising operating costs, legal risks, and heightened competition threaten long-term profitability, growth, and financial stability.

Catalysts

Offers online food ordering and delivery services.

• Rapid urbanization, evolving consumer habits, and a younger, digitally native customer base are expanding the adoption of delivery services globally; Delivery Hero's strong multi-vertical platform and exposure to high-growth urban and emerging markets position it to capture incremental user growth and higher order frequency, supporting sustained revenue growth over time.
  
• Increased adoption of digital payments worldwide is reducing friction in online ordering, particularly among younger consumers who favor convenience; this drives order frequency and larger basket sizes for Delivery Hero, which should boost both topline revenue and improve customer lifetime value.
  
• Operational leverage from AI integration and ongoing platform unification-evidenced by tech-driven cost reductions (e.g., 9.5% reduction in cost per order after Glovo integration and an 18% increase in deliveries per rider per hour in Korea)-is compressing logistics costs and supporting net margin and EBITDA improvement as scale increases.
  
• Expansion in Q-commerce and continued rollout of own delivery and subscription models (notably in Korea and Turkey) open new revenue streams and increase customer engagement, expected to drive both higher revenue and enhanced long-term margin structure.
  
• Strong leadership positions in diverse geographies (Asia, MENA, Europe, Americas) with demonstrated double-digit GMV and revenue growth protect Delivery Hero from competitive risks, support outsized market share capture, and lay a foundation for improving net income and long-term earnings growth.

Delivery Hero Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Delivery Hero's revenue will grow by 10.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from -5.6% today to 1.9% in 3 years time.
• Analysts expect earnings to reach €359.4 million (and earnings per share of €0.84) by about June 2029, up from -€782.9 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €918.7 million in earnings, and the most bearish expecting €61.3 million.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 34.8x on those 2029 earnings, up from -13.9x today. This future PE is greater than the current PE for the GB Hospitality industry at 15.4x.
• Analysts expect the number of shares outstanding to grow by 0.84% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.36%, as per the Simply Wall St company report.

Risks

• Ongoing regulatory challenges, particularly in Europe with the forced transition to employment-based rider models (e.g., €450 million payment demands in Spain and provisions in Italy), are leading to significant increases in labor and social security costs, which could persist or escalate, negatively impacting long-term net margins and cash flow.
  
• The company faces persistent foreign exchange volatility and headwinds, especially from depreciation of the U.S. dollar and Korean won, causing downward revisions to EBITDA and free cash flow guidance; sustained FX weakness may continue to erode reported revenues and earnings over the long term.
  
• Delivery Hero's aggressive rollout of own delivery (OD) in key markets like Korea and Turkey, while improving customer experience, is noted to yield lower margins per order compared to marketplace orders and requires up-front investments, increasing operational costs and pressuring near
• to medium-term profitability.
  
• Legal liabilities and ongoing court actions (notably the €450 million in Spain and large antitrust settlements in the EU) demand major cash outflows and create enduring uncertainty; adverse outcomes could result in further financial penalties, straining liquidity and depressing net income.
  
• Increased competition and price-based market saturation, particularly in high-growth areas like MENA and Asia, along with underdeveloped merchant funding models in Korea, threaten Delivery Hero's ability to sustain top-line growth and margin expansion, potentially leading to slower revenue growth and elevated customer acquisition and retention costs.

Valuation

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

• The analysts have a consensus price target of €33.09 for Delivery Hero 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 €45.0, and the most bearish reporting a price target of just €20.0.
• In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be €18.8 billion, earnings will come to €359.4 million, and it would be trading on a PE ratio of 34.8x, assuming you use a discount rate of 7.4%.
• Given the current share price of €35.81, the analyst price target of €33.09 is 8.2% lower. 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.