Just Eat slumps on Berenberg downgrade

Just Eat was under pressure on Tuesday as Berenberg downgraded its stance on shares of the online food delivery service to ‘hold’ from ‘buy’ and slashed the price target to 600p from 880p.

"The Just Eat equity story is now a far cry from the clean ‘winner takes all’ narrative it once was. Today, in order to continue to push Just Eat as an investment we must either believe that: a) competitors such as Deliveroo and Uber will be rational; or b) there is an imminent break-up story set to crystallise significant value," Berenberg said.

"Unfortunately, at this time, we are yet to be convinced on either: Uber’s IPO and Amazon’s recent backing of Deliveroo (subject to approval) suggests competition is likely to get tougher rather than easier, and we question whether Just Eat’s board will approve the disposal of its best assets during the investment phase."

That said, the bank noted that the shares are trading near its new base-case valuation, where it now assumes that delivery (ex-Canada) continues to be loss-making until 2023.

Given this, and with limited visibility on medium-term strategy in terms of investment and M&A, the bank downgraded its rating.