Deliveroo still a 'sell' despite solid Q1, says Shore Capital

Food delivery platform Deliveroo impressed the market with forecast-beating first-quarter numbers on Thursday, but they weren't enough for Shore Capital to change its 'sell' rating on the stock.

The broker acknowledged that the new financial year had started slightly better than expected, with gross transaction values (GTV) in both the UK-Ireland and international divisions up 6% year-on-year.

Nevertheless, while take-rates (revenues as a percentage of GTV) appear to be stabilising from the preceding quarter, Shore Capital pointed out that order numbers were flat in the UK and Ireland, compared with growth in the same period for rival Just Eat, which is shows that Deliveroo is continuing to lose market share.

"Order growth rates in key regions for ROO appear to be converging with peers and market share losses in the UK&I region vs. Just Eat despite a meaningfully higher take-rate implied cost of growth (price promo driven we suspect) could be slightly disappointing for investors", the broker said.

Shore Capital said it sees "better value elsewhere", with Deliveroo trading at higher valuation multiples to others in the sector despite weaker growth.

The stock was up 5.7% at 128.13p by 1124 BST.