Just Eat slumps on Barclays downgrade

Just Eat shares were under the cosh on Thursday as Barclays downgraded the stock to ‘equal weight’ from ‘overweight’ and raised its target price to 630p from 550p.

Barclays said it has upgraded its estimates and price target to reflect the “strong first half execution” but believes the outperformance of the shares is not enough to keep its ‘overweight’ rating.

Just Eat on 28 July reported a 107% surge in first half underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to £53.4m on a 59% increase in revenues to £171.6m. The company said active users jumped 45% to 15.9m and orders soared 55% to 64.9m.

Following the results Barclays has upgraded its earnings per share forecast for fiscal year 2016 to 11.3p from a previous estimate of 10.2p.

“Our 2016 estimates suggest Just Eat will have delivered a three-year compound annual growth rate in revenue and EBITDA of 57% and 99%, respectively. This has been driven by positive estimate momentum as a result of Just Eat’s strong market positioning and solid execution.”

Barclays said the online takeaway ordering service has delivered “consistent upgrades” since its initial public offering in April 2014. Its consensus estimates for fiscal year 2016 EBITDA have risen 80% since May 2014.

However, the bank said: “While we still see some upside to Just Eat’s conservative guidance as it continues to outmanoeuvre the competition, this is likely to be at a slower pace.

“The rate of growth in UK orders is dropping and, with a tough third quarter comp, this could come under increased scrutiny. “

Shares fell 3.51% to 549p at 0938 BST.