Just Eat’s share price slumps despite revenue beat and raised guidance
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Just Eat’s share price slumps despite revenue beat and raised guidance

Food order and delivery service Just Eat posted results for the first half of 2018 that sent its share price down. While the company posted a solid set of financials, including beats against analysts’ expectations and an increased guidance range, investor sentiment was damaged by three factors. First, the company’s on-going inward investment, which continues to be profitable, but is (obviously) costly in the short term. Second, a contraction in pre-tax profit: “because of costs associated with its acquisition of rival UK group Hungryhouse.” And third, a more competitive food order and delivery landscape in the UK.

Over the past 12 months, Just Eat’s share price has outperformed. After its recent drop, it is still up by 23% against August 2017

graph 0208 justeat

SOURCE: Yahoo Finance

Although the particulars might be a little different this time around, Just Eat has told a similar story before: the company’s share price is on a positive trajectory that suffers repeatedly from “wobbles” when investors struggle with the amount – or the reason – that it’s reinvesting into its own operations. This time around, the outflow of money is a result of lessons learnt as Just Eat operates its own delivery fleet for big name clients like Burger King and KFC. CEO Peter Plumb said: “We have more to do but we are learning quickly. We’ve raised our investment plans for the second half of the year as a sign of confidence.”

For the six months ending June 30, Just Eat said that revenues beat the Street’s expectations, coming in at £358.4 million. That’s an impressive increase of 45.3% against the same period last year. As a result, it also raised its revenue guidance for the full year, but said it would invest between £5 million and £10 million more than originally planned over the course of the year.

Disclosure

Dominion holds Just Eat in its Global Trends Ecommerce Fund.


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