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Just Eat set to deliver more on the downside

Just Eat set to deliver more on the downside

Just Eat’s 2018 earnings were tasty on paper, but the share price reaction reeks of disappointment.

  • The £5.3bn group’s adjusted core earnings were £173.9m, just above £172m expected according to Bloomberg. Revenues rose 43% to £780m.
  • The group retained guidance for 2019 revenues as high as £1.1bn
  • But shares dropped sharply at open and were 2% lower at mid-session, signalling investor dissatisfaction on:
    • Investment costs: building a delivery network is pricey, hitting margins and cash flow (the latter fell 6% to £157m).
    • UK order growth slipped to 13% in Q4 vs. Q3’s 13% and JE missed 2018 expectations

Losing first-mover advantage

  • Uber’s restaurant network grew faster last year, Deliveroo’s three times as fast
  • Multibillion-dollar Uber’s could outspend all comers
  • Cross-border synergies are problematic, so a takeover looks unlikely for now
  • There is still no permanent CEO. The interim incumbent ruled himself out on Wednesday; the one before lasted 16 months
  • The Q1 2019 statement, expected in late-April should be a catalyst

Technically, the shares, listed five years ago, broke their first long-term rising trend last August and are set to struggle unless they establish a new one. The 889.4p top of that month is a key decider.

Price chart: Just EAT Plc. CFD - weekly

Source: City Index

A shorter-term uptrend provides support, as does the 763-756p region but any repeated failure at this week’s 782.2p top will almost certainly quicken JE’s downdraft.

Price chart: Just EAT Plc. CFD – 30 minutes

Source: City Index

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