Just Eat slumps on UBS downgrade

Just Eat shares slumped on Wednesday after UBS downgraded its stance on the stock to 'neutral' from 'buy' and slashed the price target to 650p from 870p as it highlighted the need for incremental investments.

UBS said that many of the supportive signals it expected have not come through.

"Three surprises drive our more cautious view: negative trends for JE UK brand perception, a re-acceleration of UK share loss, and worrying search trends in many markets," it said.

The bank's main concern is that Just Eat is not investing enough at a time when capital is flowing into the industry and customer acquisition costs are rising.

"We have two sources of near-term concerns: 1) our statistical work leads us to lower our 2019e UK order growth forecast to +9%, below company guidance of low to mid-teens, and 2) we are 5% below consensus on 2020e EBITDA, as JE will likely need to invest to contain share loss."

UBS said signs of improved execution and a margin reset with a new chief executive would be important factors for it to turn more constructive on the stock.

At 1105 BST, the shares were down 5% at 606.20p.