Deliveroo Holdings Share Price Forecast November 2021 – Time to Buy ROO?

Shares of British online food delivery company Deliveroo Holdings (LSE: ROO) are in the red today, closing at £277.8 as of November 5^th (17:52 GMT).  The shares dropped to a low of 233p at the end of April after its disastrous Initial Public Offering. They rallied to about 400p over the next few months, before collapsing again.

Deliveroo Holdings – Technical Analysis

According to the financial statement released by Deliveroo Holdings, the market cap of the company is at £5.147 billion with total assets worth £1.881 billion. Revenue for 2020 was at £1.19 billion with a profit margin of -19.01% compared to £771.80 million in 2019.

Moving averages such as Exponential Moving Average (20)(280.1), Simple Moving Average (20)(277.9),  Exponential Moving Average (30)(285.6) and Simple Moving Average (30)(278) are indicating a sell. On the other hand, oscillators such as Relative Strength Index (14)(45.4), Stochastic %K (14, 3, 3)(32.7),  Commodity Channel Index (20)(−0.9), Average Directional Index (14)(19.0) and Awesome Oscillator(−8.6)  are neutral.

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Recent Developments

Deliveroo has recently enjoyed a lot of success with a gross transaction volume increase of 58%. It has now embarked upon expanding its partner network, following up on its successful grocery delivery venture with Waitrose. It has since signed a deal with Morrisons to create a new division called Hop which can deliver shopping within 10 minutes. It has also agreed on a deal with Amazon where it offers a complimentary Deliveroo Plus to Amazon Prime subscribers. This allows them to avoid delivery charges on orders above £25. This has more than doubled Deliveroo Plus’ contribution to total monthly active users which has grown from 15% to almost 30% as of the latest company report.

Many analysts had expected Deliveroo’s sales to decline after the economy reopened. However, the opposite has happened, with sales increasing 82% year-on-year in the second quarter. However, the reasons for the share price decline can be attributed to the company’s heavy losses, increased competition from the likes of Uber Eats, rising costs and concerns about the gig economy. With European regulators now clamping down on companies employing gig workers, Deliveroo has felt the effects. It was forced to leave Spain earlier in the year due to new worker legislation in the country.

Deliveroo has also taken some steps to ensure rider satisfaction after the company found itself in turmoil across several nations where delivery drivers demanded better remuneration. In an effort to address this, the company has introduced insurance cover for regular riders who have been unable to work for over seven days. The company has also promised to provide a lump sum payment following the birth or adoption of a child. As it is in a market that also consists of Just Eat Takeaway and Uber Eats, the need to innovate and constantly expand across nations is essential for Deliveroo’s growth.

Should You Buy ROO Shares?

Investors should consider the overall step-change in consumer sentiment around home delivery over the past two to three years. Ordering meals, groceries and pharmaceuticals to the front door were more luxury than necessity before the pandemic, but that has changed. The partnership with Amazon will definitely is a substantial competitive advantage as it leverages Amazon’s brand strength with the company’s on-demand delivery service.

Putting together both the factors of a general change in consumer habits along with a competitive advantage over its peers, Deliveroo is definitely a share worth following. Investors who can ignore the short-term volatility and concentrate on its long-term opportunities can easily add Deliveroo shares to their portfolios.

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