Canaccord downgrades Just Eat, no longer so convinced

Just Eat was under pressure as Canaccord Genuity downgraded the stock to 'hold' from 'buy' and slashed the price target to 700p from 850p as it published new forecasts following last week's prelims and new guidance.

The brokerage cut its earnings per share forecast for 2018 by 26% to 17.1p and its estimate for 2019 by 27% to 20.4p.

"Just Eat is to make a £50m push into the adjacent Quick Service Restaurant market with the addition of delivery capability. Unsurprisingly, its share price has taken a rain check. We think Just Eat has over-delivered, and there is a defensive element in this move as its customers potentially migrate from independents to QSR alternatives and as delivery experts potentially migrate from QSR to cherry-pick the best of the independent sector."

Canaccord pointed out that Just Eat will have to take on "established, well-funded and innovative" platforms such as Deliveroo, Ubereats and Amazon Restaurants that, unlike Just Eat, take both the orders and deliver the food.

"Domino's reminded us last week that it has been delivering in the UK for +30 years. QSR operators are experimenting too and they are pushing delivery companies into competitive pitches to test the tolerances. We see higher complexity, higher competition, higher uncertainty and lower EBITDA margins as Just Eat makes its push."

At 1630 GMT, the shares were down 1.9% to 704.20p.