Deliveroo Holdings Plc

Deliveroo Holdings Plc (LON: ROO) is an online food Company. The Company connects local consumers, grocers, restaurants and riders through food delivery platform to fulfil purchases in less than 30 minutes.

The Company will release Q1 trading update on 15 April 2021.

Investment Highlights - Deliveroo Holdings Plc – Avoid at GBX 284.00

• Despite the improved financial performance in FY2020, the Company needs to manage the expenses unless it will adversely impact the future financial performance.
• As per valuation metrics, the Price/Cash Flow and Price/Book Value multiples of the Deliveroo Holdings Plc are currently higher as compared to the corresponding multiples of the Software & IT Services industry, reflecting overstretched valuations.
• From the technical standpoint, 14-day RSI is supporting a downside move (around 56 level), which means the stock price could decline in the short term.

Key Risks

• The demand and supply disruption during Covid-19 can pose a risk to product prices.
• Moreover, the increasing political uncertainties and uncertain regulatory environment can impact the ability to execute commercial transactions.

Admission on LSE (7 April 2021)

• The Company announced that 1,714,330,179 Shares has been admitted to main market of London Stock Exchange under ticker ROO.
• In six months period following admission, the Company will be making an application for 12,037,000 shares of class A to the FCA (Financial Conduct Authority) and LSE at 0.5 pence/share.

Key Financial Data – FY2020 (31 December 2020)

(Source: Company Website) 

• For the financial year 2020, the Company revenue increased to £1,190.8 million, reflecting higher sales.
• Driven by higher revenue, the Company managed to reduce loss for the year. The Company reported a loss for the year attributable to owners stood at £226.4 million (FY2019: Loss for the year of £317.3 million).
• The cash balance improved to £379.10 million as on 31 December 2020 (31 December 2019: £229.80 million).

Five Days Share Price Chart

(Source: Refinitiv, Thomson Reuters)

Conclusion

The Company has shown an improvement in financial performance in the financial year 2020. Both the top-line and the bottom-line performance declined, while profitability remained in the negative zone. Deliveroo Holdings operates in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors. The Company’s operations were also impacted by the covid-19 related restrictions and lockdown, which will further hamper the financial performance. The Company may also fail to win the confidence of investors based on the current macroeconomic environment. The stock made a 52-week low and high of GBX 271.00 and GBX 390.39, respectively.

Based on the above rationale, we have given an “Avoid” recommendation for Deliveroo Holdings Plc at the current price of GBX 284.00 (as on 8 April 2021 at 2:02 PM GMT), with support from few catalysts, needs to be evaluated at a later stage.

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