On Friday, Redburn-Atlantic initiated coverage on Deliveroo (OTC:DROOF) Holdings PLC (ROO:LN) (OTC: DROOF), issuing a Sell rating with a price target of £1.15. The firm's assessment indicates an anticipated 11% potential downside from the current share price, citing concerns over the company's future performance and market position.
According to Redburn-Atlantic, Deliveroo's UK business is expected to face challenges that may require additional investment to maintain its market position. The firm suggests that as a result, profit margins in the UK could have reached their peak. Additionally, Deliveroo's international scale is perceived to be lacking in comparison to competitors, which could pose a disadvantage in an increasingly competitive global market.
The firm also addressed the potential for Deliveroo to be acquired, deeming it unlikely due to regulatory complexities that could deter potential buyers. Furthermore, the strategic value of the UK market for Deliveroo is considered limited, which may further reduce the prospects of an acquisition.
The price target set by Redburn-Atlantic reflects the firm's projection for Deliveroo's share value by the end of 2025. This forward-looking assessment takes into account the current market conditions and the anticipated trajectory of the company's business operations and financial health.
InvestingPro Insights
As Deliveroo Holdings PLC (ROO:LN) (OTC: DROOF) navigates the competitive landscape of online food delivery, InvestingPro data provides a deeper understanding of the company's financial position. With a market capitalization of $2.62 billion, Deliveroo's financial health shows both strengths and challenges. The company's aggressive share buyback strategy, as indicated by InvestingPro Tips, suggests confidence from management in the company's value. Additionally, Deliveroo’s strategy has led to a financial structure where it holds more cash than debt, providing a cushion for future investments or to weather economic downturns.
Despite these strengths, Deliveroo's profitability remains a concern. Analysts do not expect the company to be profitable this year, aligning with the P/E Ratio (Adjusted) for the last twelve months as of Q4 2023, which stands at a negative 79.79. This metric underscores the company's current challenges in generating earnings relative to its share price. Moreover, Deliveroo does not pay dividends, which could impact its attractiveness to income-focused investors.
Looking at revenue, Deliveroo has seen a slight increase of 2.8% in the last twelve months as of Q4 2023, with a gross profit margin of 35.78%. Though there is growth, the modest revenue growth rate of 0.79% in Q4 2023 suggests that the company's top-line expansion is progressing slowly.
For investors seeking additional insights, there are six more InvestingPro Tips available for Deliveroo Holdings PLC, which could provide further context on the company's financial nuances and market performance. To explore these tips and gain a comprehensive understanding of Deliveroo's investment potential, use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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