The European food delivery sector is poised for a positive shift in 2025, as highlighted by analysts at Bank of America who foresee a gradual improvement in sentiment amid a recovering macroeconomic landscape. After facing a challenging trading environment in recent years, the industry stabilized in 2024, with a notable rebound in share prices following a decline in 2023.
Key Points:
– Analysts anticipate a recovery in both performance and sentiment for the food delivery industry in 2025, driven by factors such as the resumption of online penetration, easing cost-of-living pressures, and potential rate cuts in the UK and Europe. These factors are expected to enhance sentiment around long-duration assets like e-commerce.
– Industry-wide trends are expanding the total addressable market for food delivery services, with ventures into new areas such as on-demand grocery and retail deliveries contributing to this growth.
Recent Developments:
– Deliveroo reported strong growth in its final quarter, with a 7% increase in gross sales on the platform. The company expects its annual earnings to be at the upper end of its forecasted range, supported by improved orders and increased customer spending. Deliveroo is on track to achieve positive free cash flow for 2024, meeting market expectations.
– Deliveroo is projected to experience growth in its grocery and advertising business, with estimated top-line compound annual growth of around 10% through 2027.
– Just Eat Takeaway’s sale of its Grubhub unit is seen as a positive move that eliminates a key overhang for the company’s stock, strengthens its balance sheet, and refocuses attention on its strong operations in Northern Europe.
– On the other hand, Delivery Hero faces various perceived risks, including heightened competition in South Korea, the emergence of Chinese player Meituan in Asia, and the adoption of a more expensive employment-based rider model in Spain.
Analysts’ Recommendations:
– Analysts at Bank of America maintain a “buy” rating for Deliveroo and Just Eat Takeaway, while assigning an “underperform” outlook for Delivery Hero.
In conclusion, the European food delivery segment is poised for growth and positive sentiment in 2025, driven by various market dynamics and improving industry conditions. Investors may find opportunities for potential upside in companies like Deliveroo and Just Eat Takeaway, while exercising caution with Delivery Hero in light of the perceived risks.
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