Investing.com -- Stifel has initiated coverage on two leading European online delivery companies, Delivery Hero (ETR:DHER) and Just Eat Takeaway (AS:TKWY), as part of a broader analysis of the online food delivery sector.
This move comes at a crucial time when the industry is transitioning from years of rapid expansion, often referred to as "Blitzscaling," to a focus on profitability and market leadership.
Both companies have undergone changes in their approach, with management teams concentrating on optimizing portfolios by exiting less profitable markets and reinforcing their dominant positions in key regions.
Stifel flags a clear preference for Delivery Hero, which received a "buy" rating and a price target of €60.
Delivery Hero's strong growth potential, particularly in its core markets such as South Korea and the Middle East, is underscored by the company's effective management of its portfolio, including recent strategic moves like the planned IPO of talabat in the fourth quarter of 2024.
These steps are expected to crystallize value for shareholders. On the other hand, Just Eat Takeaway (LON:JETJ) was given a more cautious "hold" rating with a price target of €14.80.
While the company has made strides in improving margins, especially in Northern Europe, its overall growth profile lags behind its peers, and short-term catalysts that could drive a re-rating are currently lacking.
As per Stifel, both companies have faced challenges in maintaining profitability amid fierce competition, but the long-term outlook for the sector remains positive as companies begin to realize the benefits of market leadership and operational streamlining.
Delivery Hero's exit from less profitable regions, such as Taiwan and Vietnam, and Just Eat Takeaway's retreat from New Zealand and France, reflect a broader trend of consolidation within the industry.
However, competition from global operators like Uber Eats (NYSE:UBER), DoorDash (NASDAQ:DASH), and emerging players such as Meituan remains a key concern.
The analysts also shed light on the potential for future M&A activity, which could further reshape the competitive landscape.
Stifel notes that major transactions, such as a rumored takeover of Deliveroo (OTC:DROOF) by DoorDash, could disrupt markets like the UK and Ireland, potentially affecting Just Eat Takeaway's position.