Berenberg reiterates stance on Just Eat after £50m delivery investment

Just Eat claimed - and Berenberg agreed - that early data showed that entering the delivery market could help it to acquire new customers and negatively affect the growth of its competitors.

Nevertheless, the broker believed that traditional takeaway was by no means a "dying market" and that the online company's largest hurdle would come in the form of customers ordering by telephone, which remained the dominant food ordering method in most its markets.

"We expect Just Eat to continue to take share away from this sub-optimal competitor providing a runway of growth for many years to come. Within the more nascent, extremely fast-growing delivery segment, where Just Eat today has limited market share, we think the company is well placed to capture a material portion of the growth," the analysts wrote in a Monday morning research note.

Just Eat, which already has the largest set of takeaway customers of its peer group, was seen as being in somewhat of a "damned if they do, damned if they don't" scenario at Berenberg, with investors punishing it for entering the delivery segment but at the same time arguing that it does pose a threat to Just Eat.

Either the delivery model is flawed and the company will never see a return on the money it is spending or the delivery model could become a viable threat to the company and to a sustainable and scalable business model.

"By leveraging its existing brand, corporate overheads and marketplace customers, Just Eat has as good a chance of any of reaching profitability in delivery," the analysts stated.

Berenberg reiterated its 'buy' rating on Just Eat shares but trimmed its target price from 850p to 840p per share.

"It should thus see a solid return on its investment in the mid-term. [...] We are not judging the company solely on the potential ROI on its delivery investment. The market is nascent, growth is triple-digit, and it will be some years before we truly know how this all plays out," they said.

"Concerns are overdone and we continue to think there is upside to the current valuation."