Afternoon all,
I'm fairly new to investing so would appreciate some feedback re Just Eat (LON:JE.) please.
It looked like they had a really good update and the share price dropped by approx 13% as a result.
Am I missing something somewhere?
Cheers
if your a newbie I would recommend to sticking to purchasing funds for at least the first year.
read this site, learn as much as you can/use the tools available till you get good at picking out stocks and reading the updates and listen to the way others interpret them.
gd luck.
Mpjubb, as herbie47 mentions, the update was slightly below market expectations. When I first started out, I found it confusing that certain stocks, like Just Eat, could drop even when the results on their face sounded exceptional. It took me a while to appreciate that the market had already priced in exceptional growth into these kinds of stocks and was expecting the growth to be even better than those expectations (or at the very least in line with those expectations). Any failure to meet those targets results in a big discount to the share price. Now I've said something that may seem obvious (and I've probably not explained myself well) but it may not be immediately obvious to someone just starting out. I hope this helps.
The longer I invest, the more I feel that my opinion of the results or trading update isn't that important, ultimately it's what the market thinks.
Yes sometimes the market does not go the way you expect, take Burford Capital (LON:BUR) interims last week, amazing but after an initial rise the shares fell back, only some days later the price is moving up. Often even when results are good there is a fall, I believe this is usually a good buying opportunity and the shares usually climb in the days following. With growth shares many investors are looking to beat forecasts, so if it's only an inline statement they will sell, so if worse than expected the shares can fall quite a bit. See G4M AGM statement and subsequent fall.
As it happens, I was looking at Just Eat (LON:JE.) over the weekend as my interest was also piqued by the share price fall. It's not a share I've really looked at previously so I can't claim any great knowledge about it.
It seems they bumped up guidance on full year revenue to between £500m and £515m but they've held guidance on full year EBITDA the same at between £157m and £163m, i.e. lower margins due to increased costs and investment.
That implies an expected full year EBITDA margin of between 30.5% and 32.6%, but their H1 EBITDA margin was only 29.8% so there may be increased risk around achieving their full year outturn.
Then there's also increased competition from the likes of Deliveroo and Uber Eats, with Amazon now having launched a service in this market. Rather perversely, if the CMA waves through their Hungry House acquisition, it may signal that they view this market as being a lot more competitive than they originally thought.
And there's a slight change of focus with the new partnerships with branded restaurants where previously they were focusing on the smaller independent restaurants. That focus shift may well come with lower commission rates and means more investment and more cost in the near term.
Consider - Most times you use this service many restaurants are ever hopeful next time you don't use the portal but go direct - To the extent they offer you a discount card with the delivery !!!! Good idea but it screws the restaurants - Just my own personal experience.
That's a fair point but from my limited research, the main reason I haven't opened a position are concerns about competition - notwithstanding the CMA inquiry (I found it very interesting and useful to read the material on the inquiry website), there seems to be a lot of it (competition), and some of their competitors or near-competitors have very deep pockets and will be prepared to incur "land grab" losses for prolonged periods of time which I don't think Just Eat (LON:JE.) are.
Deliveroo and Uber are already in the market, Amazon launched in London last year, Facebook are offering direct ordering in the US and it can only be a matter of time before that's rolled out to Just Eat's territories, and it would be so easy for Google to add direct ordering functionality alongside their search results. If Netflix could find a way in you would have a full complement of FANGs!
Do you really want to be going up against that crowd? Just Eat may be the current no.1 in their markets but the others are rapidly catching up and the barriers to entry and expansion are low enough that they may struggle to entrench that position.
There may well be shorter term trading opportunities though, where all the above is not so relevant.
Agree. Others have started to eat their lunch. (Sorry couldn't resist it). BTW I have no interest in JE other than a fascination with platform businesses and what makes them tick.
In February the Just Eat (LON:JE.) CEO stood down for family reasons. The Chairman took on the role but he then had to take medical leave at the end of April and sadly passed away in June.
It would be surprising if losing two key individuals didn't have an effect on the business.
They have appointed a new CEO, the former boss of moneysupermarket.com, to start in September.
Meanwhile the CMA is delving into their proposed takeover of Hungry House and has until November to make a decision.
Thanks all for your responses and advice. Its great to be able to come onto this site and get this kind of information from other members.
Cheers.
Correlation may not mean causation. In small caps we are dealing with low liquidity. Share sales may be for totally unrelated reasons such as death, divorce, change in investing strategy etc. It seems unlikely in this case as the share is reasonably liquid but in the v short term the fall may simply mean that someone has sold with no read across to business performance
