What’s going on?
Food delivery app Deliveroo raised its revenue growth forecast on Thursday – but it wasn’t enough to stop investors throwing its stock on the barbie.
What does this mean?
Doorbell dining has been one of the biggest winners of the pandemic, with would-be eater-outers forced to eat in instead. But as restaurant restrictions recede, so too has Deliveroo’s growth. While gross transaction value, a.k.a. GTV – the total amount of customer spending in the company’s app – rose 130% in the first quarter of 2021 compared to 2020, it was just 76% higher in the second quarter.
Investors had been expecting that growth to slow further still – but Deliveroo’s latest figures suggest things won’t be as bad as thought. The firm now anticipates GTV to be 50-60% higher than last year across the whole of 2021, up from previous forecasts of 30-40%. That positive update initially sent Deliveroo’s beleaguered share price up 5% on Thursday – before broader market declines helped drag it back down into negative territory.
Why should I care?
The bigger picture: Apples and oranges.
GTV growth is one thing, but profitability is another – and Deliveroo also warned extra investment in unspecified “growth opportunities” would hurt its profit margin this year. It’s previously shown interest in setting up more takeout-only kitchens, as well as grocery delivery partnerships with major supermarket chains. While investors may balk at the expenditure involved, Deliveroo’s controversial dual-class share structure means the company’s executives can press ahead regardless.
Zooming out: Dim sums.
Deliveroo’s share structure was one reason its initial public offering (IPO) flopped – and its shares remain stubbornly below their opening-day price. But Chinese IPOs on US stock exchanges are flopping for a different reason: the Chinese government is cracking down further on overseas listings, just days after it hit Didi with a blindside that sent the ride-hailing firm’s shares down 20% from its own IPO price.