How are energy investors positioned?
On Wednesday, Kepler Cheuvreux initiated coverage on Deliveroo Holdings PLC (LON:ROO:LN) (OTC: DROOF) with a Reduce rating, accompanied by a price target set at £1.56. The firm’s analysis points to potential challenges for the on-demand delivery platform, which is known for its logistics-first approach and food delivery services, primarily in the UK and eight other markets. With a market capitalization of $3.33 billion and annual revenue of $2.59 billion, InvestingPro analysis suggests the stock is trading above its Fair Value, despite showing strong YTD returns of over 57%.
The report by Kepler Cheuvreux highlights Deliveroo (OTC:DROOF)’s commitment to innovation and consumer experience but also underscores the increasing competition within the food delivery industry. The firm notes the international expansion of Meituan, the world’s largest food delivery platform, which has already impacted Deliveroo’s operations, leading to its withdrawal from Hong Kong. According to InvestingPro data, while Deliveroo maintains strong financial health with more cash than debt and liquid assets exceeding short-term obligations, its high EBITDA valuation multiple suggests premium pricing relative to peers.
The competitive landscape for Deliveroo is expected to intensify, not only in the UK but also in international markets. This is further exemplified by the recent takeover bid received by Deliveroo’s competitor, JET, from Prosus (OTC:PROSF). The CEO of Prosus is recognized for a strong track record in the food delivery sector, which could signal more aggressive moves in the industry.
Adding to the narrative, Deliveroo confirmed on April 25 that it had received an indicative proposal from DoorDash (NASDAQ:DASH) on April 5 regarding a potential cash offer of 180p per share. However, it is important to note that this possible offer is not yet firm. Kepler Cheuvreux’s stance reflects concerns over Deliveroo’s future, with the belief that the risk/reward profile of the shares is unattractive due to the asymmetric downside risks in the event Deliveroo continues to operate independently.
In other recent news, Deliveroo Holdings PLC reported significant developments that have caught the attention of investors. DoorDash has made an indicative proposal to acquire Deliveroo at a price of 180p per share, valuing the company at approximately £2.7 billion. This offer includes a 22% premium over Deliveroo’s recent closing stock price and a 32% premium compared to an earlier price, as noted by Morgan Stanley (NYSE:MS). Following this proposal, Morgan Stanley downgraded Deliveroo’s stock rating from Overweight to Equalweight while raising its price target to GBP1.80 from GBP1.40. The firm suggested that Deliveroo shares might trade close to the indicative offer price soon, aligning with market averages. These recent developments have prompted investors and market watchers to closely monitor Deliveroo’s next moves regarding the potential acquisition by DoorDash.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.