It’s fair to say the Deliveroo (LSE:ROO) initial public offering (IPO) six months ago was disastrous. Since then, the Deliveroo share price has experienced a roller-coaster ride. Looking at things today, should I buy shares for my portfolio or avoid them?
Deliveroo share price rollercoaster
When Deliveroo decided to float on the London Stock Exchange (LSE) back in March, there was a sense of excitement in the air. Unfortunately, the IPO was not a successful one. Deliveroo floated with a value of £7.6bn at 390p per share. By the end of trading on its first day, shares closed at 287p per share. One month later and shares had fallen to a low of 228p per share.Â
Since that low, the Deliveroo share price fought back amid some positive results and increased investor sentiment. In fact, at this time last month, levels surpassed the IPO price of 390p and traded for 395p per share on 18 August. Since that time, however, shares have fallen once more. As I write, shares are trading for 316p per share. A recent positive trading report and a German firm buying a stake in Deliveroo benefitted the share price but reopening has dampened things once more in my opinion.
Positives and negatives
I have weighed up some of the positive aspects, as well as negatives and risks of buying Deliveroo shares for my portfolio.
- POSITIVE: Recent performance has been great. In its half-year report announced last month, revenue shot up 82% for the six months between January and June. If this trend continues, the Deliveroo share price could rise and surpass the IPO levels once more.
- NEGATIVE: During the pandemic, Deliveroo reported brilliant sales as more consumers relied on deliveries of home meals. Now that the economy has reopened and consumers are yearning to venture out once more, I think Deliveroo’s sales could take a hit, especially as a Deliveroo meal costs more than ordering from a restaurant directly.
- POSITIVE: Recently, German food delivery titan Delivery Hero purchased a 5% stake in Deliveroo, which benefited the Deliveroo share price. There are also rumours of a takeover. Delivery Hero would boost Deliveroo’s profile, offering and geographical footprint in my opinion.
- NEGATIVE: Investment in Deliveroo’s platform has been costly to date and will continue to be for the near future. Analysts predict Deliveroo will not make a profit until 2024 at the earliest. This will affect investor sentiment and potentially weigh down the Deliveroo share price in my opinion.
- POSITIVE: Deliveroo continues to diversify and add more restaurants to its platform. In Q2 alone, it added 10,000 new vendors to its platform. It also continues to add new revenue streams to its armoury. For example, it has teamed up with Boots to offer home delivery on health and beauty products.
- NEGATIVES: Competition will affect Deliveroo’s progress. There are big players out there vying for market share such as Just Eat and UberEats and lots of smaller platforms too.
My verdict
Overall I believe the Deliveroo share price will continue to experience fluctuations in the near future. Personally, I would not buy Deliveroo shares for my portfolio just now. I believe the negatives outweigh the positives and I would not feel comfortable investing my hard earned cash. I will keep a keen eye on developments, however.