Deliveroo Share Price Forecast December 2021 – Time to Buy ROO?
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Shares of British online food delivery company Deliveroo (LSE: ROO) are in the red today, after closing at 262.6p as of December 2nd (17:49 GMT). Since being listed, ROO shares have lost around 24% of their value since being listed. But with a string of positive news coming out of the company, investors are again interested in the shares.
Deliveroo – Technical Analysis
According to Deliveroo’s financial statement, the market cap of the company is at £537.502 billion with total assets worth £188.06 billion. Revenue for 2020 was at £119.08 billion with a profit margin of -19.01% compared to £77.18 million in 2019.
Oscillators such as Stochastic RSI Fast (3, 3, 14, 14)(0.0), Williams Percent Range (14)(−99.5), Bull Bear Power(−44.0) and Ultimate Oscillator (7, 14, 28) (38.9) are neutral. Moving averages such as Exponential Moving Average (10)(294.5), Simple Moving Average (10)(301.3), Exponential Moving Average (20)(294.1) and Simple Moving Average (20)(294.7) and Exponential Moving Average (30)(293.5) are indicating a sell action.
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Recent Developments
According to the company’s third-quarter results, Deliveroo is in a very favourable position with gross transaction volume (GTV) increasing by an impressive 58%. The company has also embarked upon forging ties with other big brands. Not only was its grocery delivery venture with Waitrose a success, it has also inked a deal with Morrisons to open a new division called Hop, which will allow shoppers to shop within ten minutes. The company has also announced a partnership with Amazon in which the latter offers a complimentary year of Deliveroo Plus to Amazon Prime subscribers, allowing them to avoid delivery charges for orders exceeding £25. This has more than doubled the company’s total monthly active users.
However, not all investors are convinced, despite management raising its growth expectations for 2021. There are feats that the company’s GTV won’t climb in the long term despite doing so in the short term. Deliveroo’s growth rate has already started to stumble since pubs and restaurants are offering dine-in services again. Even the 58% growth mentioned above is actually a downgrade from 76% in the previous quarter. The company’s average order value has also started to decline, with investors using the latest decline in share price as an opportunity to jump ship.
Should You Buy ROO Shares?
Investors may be encouraged by the string of partnerships and its efforts to expand its revenue stream. However, some other metrics may be disappointing to investors such as lowered gross profit margins of 7.5% for 2021. Deliveroo surprised the market back in August with its interim results, which revealed that gross profit margins for the year may be lower than investor expectations.
The past two years have seen a drastic shift in consumer sentiment around home delivery. What used to be regarded as a luxury before the pandemic has now become more of a norm. While many analysts expected Deliveroo’s sales to decline once the economy reopened, the opposite happened. The company recorded an 82% increase in sales year on year in the second quarter.
Partnerships with the likes of Amazon are expected to provide Deliveroo with a substantial competitive advantage. There are chances that there are future agreements in the pipeline and the partnership will only grow if both companies benefit from it.
Considering this point combined with the general change in consumer habits, it seems like the market, in general, is missing Deliveroo’s potential. Thus, if you could ignore the short-term volatility of the shares and only consider the long-term opportunities, You can easily add ROO shares to your portfolio.
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