Despite Amsterdam-based Just Eat Takeaway.com’s hopeful acquisition of Grubhub in June, many investors are beginning to think that the transaction may have been a mistake.
This past week, The Wall Street Journal covered an earnings report released by Just Eat Takeaway.com, which revealed that orders increased by 14% globally in Q4 of 2021 compared to the same time period of 2020, which fell 25% below the forecast that analysts anticipated. The European delivery app’s weakest region was North America, with orders increasing just 6%.
Why is Just Eat Takeaway.com Struggling to Perform?
While delivery orders slowed down in October and November as people started going back to restaurants, they started to increase in December as the Omicron variant started spreading.
Even though orders might be picking up, Just Eat Takeaway.com’s newest acquisition, Grubhub, has been losing significant market share to competitors in North America. Due to their big presence in more urban markets, they’ve been struggling to make up for the lack of corporate customers, which have been ordering at about half the rate they were prior to COVID-19. Additionally, new permanent caps on the delivery fees that delivery apps can charge their restaurant partners has been hurting earnings too.
Grubhub’s declining profits have been hurting their acquirer. The Wall Street Journal reported that Just Eat Takeaway.com lost about 40% of its market value last year and dipped even further as investors have stepped back. As a result, shares have become relatively cheap, 1.5 times projected sales, which is far lower than the 8.1 times multiple of DoorDash.
U.S. Competitors are Moving Into Just Eat Takeaway.com’s Prime Markets
Unfortunately for Just Eat Takeaway.com, U.S. competitors, including DoorDash, are starting to establish even more of a presence in Europe starting with Germany, a prime food-delivery market.
Leaders set dismal expectations for investors on Wednesday as they told them not to expect the U.K. sector of its business to break even this year. As a plan of attack, the delivery company will set its sights on improving its footprint in London to win back diners lost to competitors.
What Can Just Eat Takeaway.com Do to Improve?
With the right moves, Just Eat Takeaway.com could boost their struggling share price. To start, Just Eat Takeaway.com has started talking to “strategic partners” about Grubhub. Why? Primary investor Cat Rock Capital recently advised Just Eat Takeaway.com to sell or spin off Grubhub. Additionally, Just Eat Takeaway.com could possibly sell its portion of iFood, a Brazilian-based delivery company.
While Just Eat Takeaway.com still needs to take on several challenges, it could still be one of the best affordable options for investors to consider.