Deliveroo PLC liked by Barclays but not too much

“We love many aspects of Deliveroo’s story: grocery positioning, subscription Plus, London market share, sustainability of post-pandemic growth

Barclays is still unsure of the potential of Deliveroo PLC (LSE:ROO), despite setting a 165p price target on the delivery group’s shares today.

That’s a 45% premium to the market price, but analysts at the UK bank could still only issue a “hold” recommendation on Deliveroo shares.

“We love many aspects of Deliveroo’s story: the grocery positioning, the Plus subscription, the London market share, the sustainability of post-pandemic growth, the team led by the founder and the broader customer proposition,” the bank said in a note.

“The market capitalization is ‘only’ £2bn with £1.3bn in cash and, by the way one internet analyst thinks, 0.1x GTV (transaction value) and 2x earnings Crude at 22E looks dislocated We believe there is value.

But answering its own question of why just a hold/equal weight, Barclays says: “Clear catalysts are needed to push ‘concept’ stocks at this time.”

“For Deliveroo, we are slightly below EBITDA consensus in ’22E and ’23E. Deliveroo happen in the short term.

Therefore, it prefers its rival Just Eat Takeaway.

Deliveroo shares rose 0.9% to 115p and Just Eat 3.6& to 2,379p.