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Deliveroo share price and full-year earnings results preview


MongiIG

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Outlook on the Deliveroo share price ahead of its upcoming full-year results.

Deliveroo logoSource: Bloomberg
 
 Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Wednesday 15 March 2023 

When are Deliveroo ’s results expected?

Deliveroo, the United Kingdom-based online food delivery company, is set to release its full-year (FY) 2022 results on 16 March 2023. The results are for the full-year ending December 2022.

What is ‘The Street’s’ expectation for the FY results?

‘The Street’ expectations for the upcoming results are as follows:

Revenue of £2,020 billion : +10.70% year-on-year (YoY)
Earnings per Share (EPS) : -10.14 pence : +32.4% (YoY)

Deliveroo recently stated that it broke even in the second half of 2022 but its full-year results will show whether it managed to turn a profit last year while the cost-of-living crisis raged on.

During its last quarterly earnings update, the food delivery company told its shareholders that its annual core profit margin is likely to be better than had previously been expected due to price inflation and the 350 job cuts it had made, leading to some analysts such as the ones working for Credit Suisse to upgrade Deliveroo’s share price rating to “outperform.”

Deliveroo’s sound balance sheet, which the Credit Suisse analysts feel will enable the company to embark on future share buybacks, and guard it from takeovers such as the one Just Eat had to go through when Dutch food delivery firm Takeaway.com acquired it in 2020, could be good reasons for buying the company’s shares.

On the other hand, if the food delivery company - which operates in five European and three middle eastern countries as well as Singapore and Hong Kong - were to see another quarter of declining global orders as persistently high inflation and the cost-of-living crisis perdure, Deliveroo’s share price might slide back towards the lower end of its ten-month trading range and even make a new all-time record low.

How to trade DELIVEROO into the results

DELIVEROO analystsSource: Refinitiv


Refinitiv data shows a consensus analyst rating of between ‘buy’ and ‘hold’ for Deliveroo – 3 strong buy, 4 buy, 6 hold and 1 sell - with the median of estimates suggesting a long-term price target of 114.50 pence for the share, roughly 25% higher than the current price (as of 14 March 2023).

IG DELIVEROO sentimentSource: IG


IG sentiment data shows that 97% of clients with open positions on the share (as of 14 March 2023) expect the price to rise over the near term, while 3% of clients expect the price to fall whereas trading activity over this week and month shows 62% and 71% of sells respectively.

DELIVEROO – technical view

Deliveroo’s share price has been trading in a wide range since May 2022 between roughly 105p and 73p and is currently trading close to flat year-to-date and around 19% lower than a year ago as the Covid-19 pandemic is petering out and the demand for home-delivered food diminishes.

Deliveroo Weekly Chart

Deliveroo Weekly ChartSource: Tradingview


On the daily chart one can make out a triangle formation which has been building since October of last year, during which time a major sideways trend has developed.

Deliveroo Daily Chart

Deliveroo Daily ChartSource: Tradingview


A break out of the triangle formation, on at the very least a daily chart closing basis, will likely determine the direction of the ensuing medium-term trend. Since the triangle is part of a near-one-year-long sideways trading range, a confirming daily chart close above the next further major inflection point also needs to be seen.

This is to say that, for example, a break through the November-to-March triangle resistance line at 96.10 pence would need to be confirmed by a rise and daily chart close above the November high at 104.5p for a medium-term bullish breakout to take place. In this scenario, the 3 May 2022 high at 114.7p would be eyed.

If a drop through the October-to-March triangle support line at 80.7p were to be seen, however, the current March low at 80p would also need to be slipped through on a daily chart closing basis, for the October 2022 low at 72.58p to be back in focus. In this case a far more pronounced decline may even take the Deliveroo share price down towards a new all-time record low around the 50p mark.

Summary

Deliveroo is set to release FY 2022 results on 16 March 2023.

Full-year 2022 results are expected to show a 10.7% YoY increase in revenue and a 32.4% YOY increase in EPS to -10.14 pence.

Revenue is expected to be boosted by increased core profit margins and a reduction in staff costs which may counteract the decline in global food delivery orders. Some analysts recommend buying the share because of Deliveroo’s sound balance sheet which make a future share buyback possible and greatly decreases the chance of a hostile takeover.

Long-term broker consensus suggests the share to currently sit between a ‘buy’ and ‘hold’, with a median price target of 114.5 pence for the share, roughly 25% higher than the current price.

97% of IG’s clients with open positions are long the share but trading activity this week and month shows 62% and 71% of sells respectively.

The Deliveroo share price is expected to soon break out of its October-to-March triangle formation which itself is part of a ten-month long sideways trading range.

A rise through the November-to-March triangle resistance line and 104.50 November peak would likely lead to the 3 May 2022 high at 114.7p being targeted whereas a drop through the 80p mark could open the way for a new all-time record low below the 72.58 November trough to be made.

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