Deliveroo PLC  

Deliveroo PLC (LSE: ROO) is a United Kingdom-based company which provides delivery service through its online platform. This Report covers the Key Recommendation Rationale, Conclusion, and Recommendation on the stock.

Key Recommendation Rationale – Sell at GBX 170.70

• Resistance near Current levels: ROO’s stock price crossed the Resistance (R2) which was stated in the previous report on 12 February 2025 therefore, there could be a possibility that the stock might consolidate or decline from the current levels, considering overstretched valuation. Considering the market conditions and the price action, it is prudent to exit from the stock.

• Suspension of Buyback Programme: Deliveroo has suspended its GBP 100 mn Buyback Programme with immediate effect following the receipt of an indicative proposal from DoorDash, Inc. regarding a possible cash offer for the entire issued ordinary share capital of the Company. Any potential recommencement of the Buyback Programme will be announced to the market separately.

• Decline in Revenue Take Rate: The revenue take rate dropped by 90 basis points, from 28.7% in 2023 to 27.9% in 2024, reflecting pricing pressures and the impact of targeted investments to improve the consumer value proposition.

• Increased Cost Pressures Reflected in Margins: Gross profit margin remained flat at 10.3% in 2024, the same as 2023, despite good top-line growth. The inability to improve margins, even with higher GTV and order volume, points to sustained cost pressures from competitive incentives and operational investments that are limiting profitability expansion.

• Expensive Valuation: The stock of ROO is currently offered at 8.4x on EV/ EBITDA based relative valuation (NTM) as compared to the industry (Technology) median of 7.3x. On Price/ Earnings based relative valuation (NTM), the stock is valued at 26.5x, which is higher than the industry median of 14.9x.

• Macroeconomic Risk: The market sentiments can remain weak in the short term due to the subdued consumer disposable income, geopolitical tensions, and political risks.

Valuation Methodology: Price/ Earnings Approach

Share Price Chart  

Conclusion

ROO recently suspended its GBP 100 mn share buyback programme following the receipt of an indicative proposal from DoorDash, Inc. Additionally, ROO is expected to trade at a discount, considering the decline in revenue take rate, a 1% decrease in net cash to GBP 667.9 mn in 2024 from GBP 678.8 mn in 2023, increased cost pressures reflected in margins, rising inflationary pressures, and ongoing price wars impacting profitability. For conducting the valuation, the following peers have been considered: Greggs PLC (LSE: GRG), ITV PLC (LSE: ITV), etc.

Given its current trading levels, the recent strategic investments and partnerships, relative valuation, and associated risks, it is prudent to exit the stock at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the Current Market Price of GBX 170.70 as of 28 April 2025, 08:05 AM, GMT+1. 

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 28 April 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and/or technical analysis taking into consideration both short-term and long-term scenario.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’