Just Eat Takeaway.com NV
Just Eat up 3.5% after City broker turns positive ahead of New York decision
Published: 09:52 10 Jun 2024 BST
Just Eat Takeaway.com NV -
Shares in Just Eat Takeaway.com NV were up 3.5% in morning trading after a City broker turned 'buyer' on stock in the food delivery group.
Panmure Gordon has provided an analysis of the business, focusing on its subsidiary, GrubHub.
Over the past year, Panmure has considered JET to be a value trap — an investment that appears to be undervalued but lacks a clear path to recovery. However, recent developments in New York City may offer a way out of this situation.
The council there has scheduled a hearing on June 21, to discuss a bill that would remove the fee caps currently limiting GrubHub's earnings.
These caps restrict the commission GrubHub can charge on orders to 8%, down from around 15%.
If the bill passes, it could significantly boost GrubHub's revenue, potentially increasing it by €50-100 million. This would help GrubHub reach free cash flow profitability, alleviating some of the financial pressure it has been under.
The putative legislation has 19 co-sponsors, and it needs 26 out of 50 votes to pass, meaning it only requires seven more votes.
Panmure believes that removing the fee caps will not only increase revenue but also make GrubHub more attractive to potential buyers.
This is because it would provide much-needed clarity about GrubHub's operating environment and help align valuation expectations between JET and potential buyers.
Despite these positive developments, Panmure notes that GrubHub remains a shrinking business in an otherwise growing market.
It doubts that the recent five-year partnership with Amazon will be enough to reverse this trend.
If GrubHub cannot be sold even after the fee caps are removed, Panmure suggests that JET should consider closing the business altogether. This would still represent a step towards resolving the value trap situation.
The broker has upgraded JET to a "buy" rating, given the potential catalyst of the New York City bill and the recent decline in JET's share price, which they believe has created a 40% upside potential. It has set a target price of 1,445p for JET's shares.
In morning trading the stock was up 36p at 1,058p.