Just Eat unappetising as Amazon takes bite of Deliveroo
By Duncan Ferris
Date: Friday 17 May 2019
(Sharecast News) - Online retail giant Amazon has waded back into the food delivery market after leading a $575m funding round in Deliveroo, sending rivals such as Just Eat's shares lower in the process.
Just Eat saw its shares slump 8.47% following the news, while Takeaway.com and Delivery Hero were also lower.
Both Amazon and Uber had reportedly previously enquired about buying Deliveroo, which now operates across the world including in Australia, Singapore and the United Arab Emirates.
Other investors in Deliveroo include T Rowe Price, Fidelity Management and Research Company, and Greenoaks, with the company having now raised a total of $1.5bn since it launched in 2013.
Amazon's decision to invest in Deliveroo comes after the quiet closure of its own foray into the takeaway delivery market, with its Amazon Restaurants UK app shutting down for good in December after the service failed to unseat London's dominant Deliveroo and Uber Eats businesses.
AJ Bell investment director Russ Mould said Amazon's move "ramps up the pressure" on Just Eat's management "as they reshape the business to increasingly offer delivery services alongside an online takeaway platform".
"It is worth remembering that Just Eat remains the market leader in the UK...pressure on Just Eat's share price could leave the company vulnerable to being swallowed up by a larger peer."
Laith Khalaf, senior analyst at Hargreaves Lansdown, said the slump in the share price means Just Eat could get knocked out of the FTSE 100 in the next reshuffle, "potentially saving the blushes of EasyJet and Marks and Spencer, who are also fighting a relegation battle".
However, analysts from Liberum struck a different tone as they argued that the development meant nothing for the food delivery market aside from underpinning Deliveroo's value, as Just Eat remains comfortably ahead as the market leader in the UK.
They added that it has an estimated three to four times greater share than Uber Eats and Deliveroo combined and, more than 60% of its customers are in small towns where it is effectively the only option for restaurants and where the Uber Eats and Deliveroo model "just doesn't work because of the economics".
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