Pandemic-Era Darling Delivery Hero’s Shares Punished As Earnings Disappoint
Delivery Hero saw almost a third of its market value wiped out after 2022 earnings guidance fell short of market expectations and investors stampeded out of another stock previously considered a pandemic-era darling.
Pandemic winners and high-flying tech companies, such as exercise bike-maker Peloton Interactive, Inc., Netflix, and Facebook owner Meta, have been punished in the opening weeks of 2022, as investors – faced with volatile markets and the prospect of interest rate rises – churn portfolios.
“There has been a pretty sharp rotation in those kind of names. [...] The appetite is for investors to sell shares if earnings are getting mixed,” said one London-based capital markets banker.
Delivery Hero shares are now down almost 50% so far in 2022, reversing all their pandemic-era gains – part of a broader trend that has, for example, seen a work-from-home ETF fall nearly 10% in the first six weeks of the year, compared to a 1% fall in the broader US stock market.
Delivery Hero has invested heavily amid a boost in orders during the pandemic, as it seeks to keep rivals at bay in an increasingly competitive e-commerce space.
It noted that it still expects its core food delivery business to break even for the first time in the second half of 2022, and it gave revenue guidance of €9.5 billion to €10.5 billion for 2022 – up from €6.6 billion in 2021.
However, it forecast an adjusted-earnings-before-interest-taxes-depreciation-and-amortisation/gross-merchandise (EBITDA/GMV) value margin of around -1.0% to -1.2% for the full year, compared to the -0.9% forecast by analysts.
The share price reaction to the earnings of European companies has been negatively skewed so far this season, especially for growth stocks, Morgan Stanley noted this week.
According to the US bank, the median growth stock that has missed on profit expectations has fallen by 3.7% on the reporting day, against a 0.8% drop for value stocks that have missed.
Ahead of Delivery Hero’s earnings release, JPMorgan analysts had sounded upbeat, saying that they expected it to “provide support to our constructive stance”, adding that the firm was among the European Internet stocks with the best risk/reward profile for investors.
While Citi noted that it expected some initial share price weakness, UBS analysts noted, ‘We expect [the company’s] profitability comments to be taken well with reassurance coming there, but that positive view is likely to be offset by the q- [quick] commerce losses.’
Delivery Hero chief executive Niklas Oestberg told a media call that the company would update its outlook after completing the acquisition of Spanish start-up Glovo, expected in the second quarter.
It noted that it expected Glovo to make an adjusted EBITDA of -€330 million this year, which JPMorgan noted was €100 million above its own estimate.