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Delivery Hero Shares Soar On Upbeat 2023 Outlook, Profit Focus

By Dave Simpson

Delivery Hero shares rose as much as 12% on Thursday 10 November after the loss-making German takeaway food company forecast a positive adjusted core profit margin for next year as it focuses on achieving profitability over growth.

Details

The Berlin-based firm said it expects gross merchandise value, the total value paid by customers including VAT, delivery fees, service fees and other subsidies, for 2022 to be at the lower end of its forecast €44.7 billion to €46.9 billion range.

However, Delivery Hero forecast an adjusted core loss (EBITDA) margin of -1.4% to -1.5% of GMV, from -1.5% to -1.6% previously, and said it expects to achieve an adjusted core profit margin on GMV of more than 0.5% in 2023.

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"We see this confirmation of a robust growth trajectory despite a plethora of ongoing headwinds as encouraging," analysts at Credit Suisse wrote in a note.

Delivery Hero's shares were up 8% at 0938 GMT on Thursday 10 November, after rising as much as 12% in morning trade, following the forecasts.

One fund manager flagged short covering as magnifying the stock price move.

After making gains during the COVID-19 pandemic, Delivery Hero has focused on reaching long-awaited profitability as investor confidence in the fast growing but mostly unprofitable sector started to dwindle.

Chief executive Niklas Oestberg told Reuters that Delivery Hero is evaluating exiting a couple of markets where the company might not be able to achieve profitability, without giving further details.

However, Delivery Hero sees growth opportunity in Turkey, he said, when asked about minor investments it is making in two key markets in the Middle East and North Africa region.

DoorDash Results Impress As Taste For Takeout Defies Inflation

The above news followed news that food delivery firm DoorDash Inc's orders surged to a record high in the third quarter as demand held strong against higher prices and rising inflation, helping it beat Wall Street targets for revenue.

Even though dining out has resumed in force, people are still ordering food online from the comfort of their homes like they did during lockdowns.

DoorDash has, however, started to see a bit of an impact from recession-wary people buying fewer items each time they order, a company spokesperson said.

Still, for the time being, all was rosy as it recorded 439 million orders in the quarter and a 30% rise in gross order value - the total value of all app orders and subscription fees - to $13.53 billion.

Apart from food, categories such as grocery, convenience and retail also did well.

"Retail and grocery partnerships will be a growth driver for DoorDash, which will also create an opportunity for higher average order value," Third Bridge analyst Nicholas Cauley said.

DoorDash forecast fourth-quarter gross order value of between $13.9 billion and $14.2 billion, and reiterated full-year expectations for the key industry metric.

Labour shortages have been a concern for US delivery companies, but UberEats parent Uber Technologies Inc said last week active drivers were back to levels seen before the pandemic in September 2019.

DoorDash said it has not been affected by driver shortages except in the first quarter of 2021, when the US government issued its second round of stimulus checks to help people cope with the pandemic.

The company's revenue rose 33% to $1.70 billion in the third quarter, surpassing analysts' estimates of $1.63 billion, according to IBES data from Refinitiv.

However, the San Francisco-based firm posted a bigger-than-expected net loss of $295 million, or 77 cents per share.

UPDATE 3-Delivery Hero Set For Best Day In Over Seven Months On Upbeat Growth Outlook, Profit Focus

All of the above news was followed by the following update:

Delivery Hero shares rose as much as 15% on Thursday 10 November after the loss-making German takeaway food company forecast a positive adjusted core profit margin for next year as it focuses on reaching profitability over growth.

The Berlin-based firm said in a call it should be able to drive compound annual growth rate of about 20% to 25% over many years on a gross merchandise value (GMV) basis.

The company, which did not give an outlook for GMV in 2023, expects the figure for 2022 to be at the lower end of its forecast €44.7 billion to €46.9 billion range.

It forecast an adjusted core loss (EBITDA) margin of -1.4% to -1.5% of GMV, from -1.5% to -1.6% previously, while targeting an adjusted core profit margin on GMV of more than 0.5% in 2023.

Shares were up 15% at 1506 GMT on Thursday 10 November, set for their best day in over seven months.

One fund manager flagged short covering as magnifying the stock price move.

A pandemic-era winner, Delivery Hero has focused on reaching long-awaited profitability as investor confidence in the fast growing but mostly unprofitable sector started to dwindle.

Chief executive Niklas Oestberg told Reuters that Delivery Hero is evaluating exiting a couple of markets where the company might not be able to achieve profitability, without giving further details.

If the firm were to sell assets, it would not mean they would automatically lift core profit guidance for 2023, he added in an analyst call, saying there may be more investment opportunities among other reasons not to do so.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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Enjoy full access to Hospitality Ireland, our weekly email news digest, all website and app content, and every digital issue.
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Enjoy full access to Hospitality Ireland, our weekly email news digest, all website and app content, and every digital issue.
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