JPMorgan starts coverage of Deliveroo at 'neutral'

JPMorgan Cazenove initiated coverage of Deliveroo on Tuesday with a ‘neutral’ rating and 285p price target, saying that while the stock’s valuation is attractive versus peers, the risk/reward is balanced at this level and it prefers overweight-rated Delivery Hero.

"The pandemic significantly accelerated consumer adoption of food delivery in 2020 with the platform seeing +55% year-on-year order growth, +64% growth in gross transaction volume (GTV) and also positive adjusted EBITDA for two quarters (-£10m for FY2020)," the bank said.

"From here, we factor in a +31% GTV compound annual growth rate 2020-2023 and expect EBITDA profitability by 2023."

JPM said growth rates will slow with easing Covid-19 restrictions and comps are getting more difficult, but food delivery is benefiting from strong structural tailwinds in the long term and it is positive on Deliveroo’s value proposition.

"However, with three (well-funded) players competing hard for market share in the UK, visibility on marketing spend is low," it added.

At 1130 BST, Deliveroo shares were up 1.3% at 250.12p.