Just Eat Takeaway (LSE: JET) is the biggest early faller on the FTSE 100 on Friday, at least at the time of writing. The Just Eat share price is down 4.5%, with the second worst performer, Sainsbury, off by 1.7%. On its own, that’s the kind of fluctuation that can happen any day, without any real meaning.
But for Just Eat, it continues what has so far been a disappointing 2021. When the pandemic crash hit in 2020, Just Eat was one of the first to post a recovery. Lockdown meant no eating out, less going to the shops, and a boost for takeaway food services.
But as the bulk of FTSE 100 started to turn upwards later in the year, Just Eat shares headed in the opposite direction. The pandemic effect on its share price, it seems, was more transient than for others in the home deliveries business.
Take Tesco, for example. I was always convinced the supermarket giant would enjoy long-term benefits from the forced rise in online shopping. Most people just hadn’t got round to trying it, and many that have are now going to stick with it.
Is takeaway delivery different? It is for me. Tesco shopping’s easy. I know what I want, always order same stuff, and it turns up at the door. If I want takeaway food, I rarely know what I fancy until I’ve headed out, examined menus, and taken in the sights and smells. And if that doesn’t put me off, I might buy something.
No seismic change?
The Just Eat share price fall though, might not be down to any short-term changes in home dining habits. No, I think there’s something else that might be happening. Yes, I reckon investors really did switch to Just Eat as one of the stocks they thought would do well during the pandemic. But now, maybe they’re simply getting back to seeing it as a company that needs to be valued on its fundamentals. You know, like they all do, in the long term.
For Tesco, that’s easy. The fundamentals are solid, the profit’s there, and the dividends are being paid. But what about Just Eat? Well, first-half results released on 17 August showed a 52% jump in revenue, to €2.6bn. That’s impressive. But it still resulted in an EBITDA loss of €190m. The company reckons it “has reached the peak of its absolute losses in the first half of 2021” though.
Just Eat share price valuation
So that’s good, and it suggests we should see losses starting to narrow and the company heading towards profitability. But that does make it very hard to work out a fair level for the Just Eat share price right now. It exhibits the very same risk as all early-phase unprofitable growth stocks. If you get the price wrong in the early days, you could pay too much for it and end up losing. I’ve seen that happen many times.
Now, that doesn’t mean I have a negative outlook towards Just Eat stock. No, on the contrary, part of me feels we could see some very nice share price gains in the coming years. It’s just not one for an old investor like me, who much prefers the safe reliability of steady dividends.