The patience of investors in Deliveroo Holdings Plc (LSE:ROO) shares has been tested since its initial public offering (IPO) in March 2021. In 2021, the food delivery company saw its market capitalisation get slashed by 27%. The following year, this downward trajectory continued with another 59% tumble in the Deliveroo share price. Needless to say, most shareholders weren’t happy.
However, the tide may be turning. So far in 2023, shares are actually up by 45%, making it one of the best-performing stocks on the London Stock Exchange. Is the company finally on track to deliver the explosive returns investors have been waiting for? Let’s explore.
What does Deliveroo do?
Deliveroo engages in the provision of online food delivery services. It operates majorly in the UK, Ireland and Internationally.
It connects local consumers, restaurants, grocers and riders. The group, which was founded in 2013, works with 179,000 best-loved restaurants and grocery partners with over 150,000 Deliveroo riders to try and provide the best food delivery around the world.
In total, its network expands across 800 locations in 10 markets. In my opinion, that creates the potential for massive shareholder value in the long run. Of course, this has yet to be reflected in the Deliveroo share price. As previously highlighted, investors are down more than 55% since the Deliveroo IPO.
Deliveroo share price: what do the numbers say?
Despite what the stock price would suggest, 2022 was a solid year for Deliveroo. At least, that’s the impression I’m getting when looking at its full-year results. While they weren’t perfect, the figures were quite encouraging, considering the unfavourable economic environment management was navigating.
In 2022, the company delivered 299 million orders to consumers worldwide1. This was a 5% growth compared to 2021 in spite of the cost-of-living crisis and inflation. Meanwhile, the company grew its average monthly active consumers across its 10 markets to 7 million, up 6% year-on-year.
Management also reconfigured its target markets, exiting underperforming regions such as Australia and the Netherlands. However, the firm is now pursuing new opportunities within the Middle east, specifically in Qatar. The jury is still out on whether these moves will yield positive returns. Yet, it’s good to see management taking necessary steps towards mitigating costs and expanding revenue growth.
Gross transactions value came out at £6.8bn, up 7% against 2021, while Revenue was £2.0bn, up 14% from 2021. Gross profit was up 9.4%.
Obviously, this growth is far from what the company was experiencing near the height of the pandemic. And since the Deliveroo share price was trading at quite a premium, seeing a rapid decline in valuation makes sense. Having said that, these figures are certainly nothing to scoff at. Even more so now that Deliveroo expects to be profitable as early as the second half of 2023.
2023 Q1 results are encouraging
The first quarter results for 2023 paint a similar picture2. Revenue growth has slowed further to 4%, with gross transaction value falling by 1%. While that’s far from ideal, in light of the UK’s economic slowdown, that’s not unexpected. However, management’s guidance for 2023 remains unchanged. And adjusted EBITDA is on track to land between £20m and £50m in the second half of the year.
Commenting on the result, the CEO and founder, William Shu, said,
“Revenue growth of 4% and broadly flat GTV (both in constant currency) represents a resilient performance, particularly in the context of inflationary pressures and the ongoing cost of living crisis and against a challenging comparison base. Against this backdrop, I’m particularly pleased with our performance in UKI, reflecting a further improvement in our offering to consumers. We remain confident in our ability to deliver our plans to drive profitable growth and sustainable cash generation.”
Is the Deliveroo share price about to surge?
In my view, the company is continuously making progress. While no one can accurately predict when or if a surge will come, I see the current Deliveroo share price today as an opportunity to buy for my portfolio. Moreover, the over 45% YTD rise in the Deliveroo stock price appears to be pointing out that investors are beginning to see real value in the stock.
Although I am quite optimistic about the business, I also recognise that the Food delivery service is getting more competitive. Competition from Eat, Uber Eats, and others could affect the market share of Deliveroo, which in turn could impact revenues. So far, Deliveroo shares seem to be heading in the right direction, and I’m personally confident that management can maintain this trajectory.
Learn more about Deliveroo
- The Deliveroo share price is rising after its new partnership
- Is the falling Deliveroo share price a buying opportunity?
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Article sources
- Deliveroo. “Full Year 2022 Results Investor Presentation“
- Deliveroo. “Q1 2023 Trading Update“
Prosper Ambaka does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and, therefore, may differ from the opinions of analysts in The Money Cog Premium services.
