Deliveroo: How will slowing takeaway sales impact the year-end update of Deliveroo?

Deliveroo PLC will give a fourth-quarter trading update on Thursday. Investors will be hoping it finds a way to slow down growth after industry research shows a decline in food delivery last year.

The UK’s delivery industry saw a 1% drop in sales in November compared to the previous year, according to research by CGA. This was the 12th consecutive month of sales declines in the delivery sector year-on-year due to lower demand following the pandemic.

Data showed that the takeaway industry was almost twice as large as it was before the pandemic. Deliveries made up about a fifth of the major restaurant chains’ business.

The FTSE 250-listed online food delivery firm had already reduced guidance for full year underlying profits in October’s third quarter update. Before closing down operations in Australia in the following month, the company was also listed on the FTSE 250.

Its share price fell by more than 45% in the past year. This trend was echoed by competitors Just Eat NV, NASDAQ:GRUB, down 46%, Delivery Hero (ETR :DHER OTCQX :DLVHF), down 39%.

We believe Deliveroo is an under-appreciated stock. Analysts from Jeffries said that it has been a leader in strategy and is now leading the charge on growth, especially in the UK.

They added that Deliveroo had now gotten rid of all its trouble markets and accelerated its path to profitability with the Australia exit.

Jeffries targets a PS1.55 price per share and rates the stock as a “buy”, while Deliveroo is currently trading at 93p. This is up 1.8% today.