UBS initiates coverage of Domino's and Just Eat at neutral and sell

UBS has initiated coverage of Domino’s Pizza at ‘neutral’ with a target price of 975p and Just Eat at ‘sell’ with a target price of 330p.

The investment bank said Domino’s is one of the winners in the growing online takeaway market.

“Our Evidence Lab survey of more than 1,000 respondents in the UK gives us confidence that the impact of third-party operators such as Just Eat should be limited in the long term, and that Domino's can continue to benefit from the increasing penetration of online and mobile in the UK takeaway market.”

The survey also showed that taste and delivery speed were among the top four factors most valued by customers – factors that can’t be controlled by food delivery aggregators like Just Eat.

However UBS said Domino's long-term growth potential has been limited by the joint venture with its German business.

“Whilst this provides a short-term fix to what has been a problematic region, we think Domino's has lost a significant long-term growth opportunity.”

For Just Eat, UBS said its survey suggests that Just Eat is the leading takeaway aggregator in the UK and France.

However the number of competitor platforms and the impact on the company is underestimated.

“We believe three-sided marketplaces that include a delivery element – like Deliveroo and UberEATS – represent more compelling solutions for both diners and restaurants, since they have greater control over quality and delivery times, and offer online access to restaurants that do not have delivery capabilities.”

At 1043 GMT, shares in Domino’s Pizza Group were down 6.5p (0.66%) to 978p, while shares in Just Eat had dropped 9.4p (2.52%) to 364p.