Will the Deliveroo share price rise in August?

The Deliveroo share price is up 5% today after Germany’s Delivery Hero bought a stake in the company. Can it rise more?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

Deliveroo (LSE: ROO) has come a long way. The food delivery app had a disappointing debut at the London Stock Exchange in March this year. By the end of April, the Deliveroo share price had dropped to its lowest levels so far. Now it is up 50% from those lows as I write!

Delivery Hero acquires stake

But I think the best is yet to come for Deliveroo. Its shares are up some 5% in today’s trading on the news that the German delivery giant Delivery Hero has acquired a 5% stake in the company. Its CEO, Niklas Östberg, has said that the stock looks undervalued to them as per a Financial Times report. 

If this were coming from anyone else, I may have taken the remark with a pinch of salt. However, Delivery Hero is a big company in the segment, with a market capitalisation more than 4.5 times that of Deliveroo’s, that clearly knows the business well. Also, interestingly, it also owns a small stake in Just Eat Takeaway, which is Deliveroo’s competitor in the UK market.  

Should you invest £1,000 in Deliveroo right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Deliveroo made the list?

See the 6 stocks

The good and the bad in the trading update

I am also encouraged by the company’s recent trading update. Its gross translation value, which is the total value paid by customers, grew by 76% in the second quarter of the year. The number is even stronger at 99% for the first half (H1) of the year. Based on these strong numbers, it now expects higher growth for the full year than earlier. 

However, there is something less positive in the numbers that caught my eye as well. Growth in the second half (H2) of 2021 is expected to slow down significantly. At best, it is expected to grow by 32% and at worst by 15%. This is a far cry from the increase in H1. 

Also, even compared to 2019, there is a softening in growth rates. From 186% in H1, it is now expected to slow down to 110%-142%. There are two clear reasons for this. The first is that H1 numbers look particularly strong, I reckon because we were still in lockdown. And second, H2 numbers show a come-off because we are less likely to order in now, as restaurants have reopened. So even though the numbers do show a decline in growth, I am not terribly concerned. Also, compared to 2019, it is still substantial growth

What’s next for the Deliveroo share price?

We will get more insight into Deliveroo’s performance when it releases its half-year results later in the week. But from the looks of it, I think there should be strong revenue growth. It will remain loss-making in all likelihood though, as it ploughs the money made back into its business. 

All in all, I like the stock. I have already bought it, for exactly the reasons that Delivery Hero states. It looks undervalued to me. And going by its rising share price, I imagine other investors believe that as well. I expect that it can rise more over time. It continues to stay a buy for me. 

But there are other promising opportunities in the stock market right now. In fact, here are:

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Manika Premsingh owns shares of Deliveroo Holdings Plc. The Motley Fool UK has recommended Just Eat Takeaway.com N.V. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Finger clicking a button marked 'Buy' on a keyboard
Investing Articles

Analysts have upgraded this FTSE 100 stock to Buy. What should investors do?

Associated British Foods shares have been uninspiring for some time. But is it finally time to consider buying the FTSE…

Read more »

Man changing battery on electric bicycle
Investing Articles

Prediction: in 12 months the sizzling National Grid share price could turn £10,000 into…

It's been another solid year for the National Grid share price and the dividend yield is decent too. So why…

Read more »

Businessman using pen drawing line for increasing arrow from 2024 to 2025
Investing Articles

Up 185% in 3 years, why does the market love this FTSE 250 stock

Over the past three years, this stock has vastly outperformed the FTSE 250. Dr James Fox takes a closer look…

Read more »

A handsome mature bald bearded black man in a sunglasses and a fashionable blue or teal costume with a tie is standing in front of a wall made of striped wooden timbers and fastening a suit button
Investing Articles

Looking for growth, dividends, or value? These 3 ETFs could be smart ideas to consider

Exchange-traded funds (ETFs) provide a way for investors to spread risk without sacrificing the possibility of huge long-term returns.

Read more »

Happy couple showing relief at news
Investing Articles

Is the Rolls-Royce share price fast becoming a joke?

The FTSE 100 engineering titan has done brilliantly in recent years. But our writer wonders whether the Rolls-Royce share price…

Read more »

Middle-aged white male courier delivering boxes to young black lady
Investing Articles

Is there a ‘best age’ to start buying shares?

Christopher Ruane weighs some possible pros and cons of waiting to start buying shares for the first time, versus starting…

Read more »

piggy bank, searching with binoculars
Investing Articles

Is it time to look again at the FTSE 250’s worst performers?

Our writer considers the prospects for two of the worst-performing shares on the FTSE 250, with falls of at least…

Read more »

A handsome mature bald bearded black man in a sunglasses and a fashionable blue or teal costume with a tie is standing in front of a wall made of striped wooden timbers and fastening a suit button
Investing For Beginners

Down over 40% in the past year, I think investors should consider these value shares

Jon Smith points out two value shares that have fallen heavily over the past year but are starting to look…

Read more »