Just Eat slides as Morgan Stanley highlights increasing competition

It pointed out Just Eat has performed very strongly since its IPO, with some appearing to believe “supernormal” growth can continue for years.

“As a result, we think sentiment on Just Eat is overwhelmingly positive and we are alone in having an underweight on the shares,” said MS, adding that the shares do not reflect risks from increased competition.

The bank said new evidence suggests the group is losing share of UK delivery restaurants as alternative platforms expand and deliver from an increasing number of restaurants.

As a result, it assumed a slight drop in Just Eat’s total addressable market over the next five years.

“While we still see Just Eat growing sharply in 2016 as online penetration of diners rises from the current circa 38% to 47%, we cut our forecasts in the outer years to reflect the increasingly competitive environment.”

For example, MS said its research of web data showed Deliveroo restaurants represent around 12% of Just Eat's total and over 50% in certain cities.

It noted that Deliveroo was launched in 2013 and only started expanding outside of London last year.

“We envisage a scenario in which Just Eat does not have most restaurants on its platform, losing the network effect which is its main barrier to entry.”

At 0905 GMT, Just Eat Shares were down 6.2% to 394.50p.