Deliveroo shares in the spotlight this week as analysts say firm could be undervalued

Investors will be watching Deliveroo’s share price this week when the firm releases a fourth quarter trading update on Thursday.

The London-headquartered firm has been under pressure since floating on the stock market in 2021, with the share price down some 67 per cent from the original offer price.

Competitors, the re-opening of society post-lockdown and costs have bitten into margins.

And the once heavily growth-oriented business exited its operations in Australia in November as part of what it called a “disciplined” approach to “capital allocation.”

“Throughout 2022 we have been adapting financially to the operating environment and driving forward on our path to profitability,” founder Will Shu said at the firm’s previous update in October.

CMC Markets’ Chief Market Analyst Michael Hewson said this weekend that “there is some optimism that the worst may well be behind” the firm, with EBITDA margins bumped up slightly in that previous update.

Analyst at Jefferies believe the sector is undervalued by markets, a conclusion drawn in part from two stints sat in a 2003 Ford C-Max outside a series of so-called ‘dark kitchens’ across London.

They also believe companies including Deliveroo and competitors Delivery Hero and Just Eat Takeaway.com could soon see balance sheets significantly boosted by a more mature advertising offering.

The analysts also suggest that whilst cost of living headwinds could see “a lunchtime sushi order… be foregone in favour of making your own sandwich” there was also a chance that firms might “also be a beneficiary of the cost of living crisis as consumers shift to in-home rather than out of home entertainment.”