Editor's Note: This analysis was originally published as a stock note by Morningstar Equity Research.
Key Morningstar Metrics for Deliveroo
- Fair Value Estimate: GBX 175
- Morningstar Rating: ★★★
- Morningstar Economic Moat Rating: None
- Morningstar Uncertainty Rating: Very High
Deliveroo Shares Have Tumbled
Shares of no-moat Deliveroo ROO jumped over 17% after the firm suspended its share repurchase program following a takeover bid from narrow-moat DoorDash. The acquisition proposal is valued at £2.7 billion, or GBX 180 per share, representing a 20% premium to Deliveroo’s closing share price on April 25. However, this is a steep discount from Deliveroo’s £7.6 billion London IPO in 2021. DoorDash has until May 23 to make a firm offer, which we think is likely to be accepted. While we await more certainty on the deal, we maintain our 175p fair value estimate and view current shares as fairly valued.
The proposal comes after a turbulent few years for Deliveroo. Following the pandemic, online food delivery saw a large pullback as consumers relied less on platforms as lockdowns eased. As a result, Deliveroo’s stock price has tumbled over 40% since its peak in 2021. Similar to its European food delivery peers, Deliveroo has exited markets in Asia and Europe due to intense competition.
We see consolidation ramping up in the food delivery sector, with Dutch technology firm Prosus set to acquire Just Eat Takeaway by year-end. DoorDash is the leading food delivery platform in North America, holding approximately 60% market share. The deal complements DoorDash’s international footprint, which the firm expanded through its acquisition of Finland-based company Wolt in 2022.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.