Deliveroo's share price got off to an inauspicious start last year after it plunged sharply from its 390p listing price.
After briefly recovering to breakeven back in August, the Deliveroo share price has been on a one-way journey to record lows since then, with little signs of a respite.
Deliveroo share price fails to deliver
The original slide in the share price was prompted by concerns over working conditions for its riders, along with the dual-class structure which restricts the voting rights of ordinary shareholders, and gives CEO, Will Shu, majority control over any significant board decisions.
The company doesn’t want for important backers, as well as a global presence across 200 cities in Asia, as well as in Europe.
Amazon has a 16% stake in the business, while sector peer Delivery Hero bought a 5% stake in Deliveroo in August, although now it probably wishes it hadn’t given the decline in Deliveroo's share price since then.
Business robust despite share price declines
Despite the declines in the Deliveroo share price, the business has been doing well. In 2020, Deliveroo generated £1.2bn in revenues and is well on course to beat that this year. However, despite evidence of improving margins and new delivery tie-ups, the shares have continued to struggle.
Consensus estimates for full-year revenues are for an increase of 56% to £1.9bn. In Q3, Deliveroo raised its guidance for this number to between 60% and 70%, while leaving gross profit margins unchanged at 7.5% to 7.75%.
The main concern for investors is rising costs, and while Deliveroo has seen orders surge due to its deals with Amazon and Morrisons, the competitive nature of the delivery market, and falls in the share prices of its nearest competitors, like Just Eat, hasn’t helped sentiment around the sector
Today’s Q4 update has seen Deliveroo reaffirm full-year proforma gross transaction value (GTV) of 70%, at £6.63bn, at the top end of its updated guidance in Q3 of 60% to 70%. Q4 orders saw a rise of 42% to 80.8m, equating to a rise of 36% GTV, beating consensus estimates. This in turn helped to push orders for 2021 to 300.6m, a rise of 73%. The company maintained its full-year guidance of 7.5% to 7.75% for gross profit margin.
More encouragingly, customers ordered 3.4 times from the app on average each month, compared to the height of lockdown in 2020, although whether this demand remains as resilient is open to question once all the UK government's plan B restrictions are lifted and people can go out more.
For now, Deliveroo's share price appears to be responding positively to today's update, although whether that can be sustained remains to be seen.
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