JPMorgan downgrades Just Eat to 'underweight', slashes price target

JPMorgan Cazenove downgraded Just Eat to 'underweight' from 'overweight' on Thursday and slashed the price target to 656p from 976p.

The bank said it was turning more cautious on the company, which had been one of its top picks in the internet sector and the wider media space for the last three years.

"Rather than the well-discussed increase in investment levels due to delivery, we see a much bigger issue for the UK operations going forward. As a result of the delayed move into delivery, Just Eat's core customer base (in terms of restaurants) is still very much skewed towards the lower-price segment which increasingly brings strategic disadvantages."

The bank said the high/mid-price segments demands delivery and is already taken by first movers Deliveroo and Uber Eats, which are strongly gaining share outside London. In addition, it argued that in the low-price segment, chains are expanding rapidly into rural areas and cannibalising Just Eat's marketplace business.

JPM said it crawled all three major takeaway platforms in the UK - Just Eat, Deliveroo and Uber Eats - searching which takeaway restaurants are available on each platform in certain postcodes in all 32 boroughs of London and also the key boroughs of other larger cities like Birmingham, Leeds or Manchester. It found that while the number of restaurant offerings remained broadly flat for Just Eat across all postcodes, there was a strong increase in sign-ups for both Deliveroo and Uber Eats.

JPM said that while Just Eat still offers the most choice and restaurant overlap with Deliveroo and Uber Eats is only around 5% to 7%, it is left with the least attractive part of the market, which is likely to face market share losses going forward.

At 1305 BST, the shares were flat at 694.20, having been under the cosh earlier in the day.