Deliveroo PLC (LON: ROO) shares may have wobbled on results day, but Deutsche Bank believes the market has misjudged the situation. The bank reaffirmed its ‘Buy’ rating, projecting a 50% upside from current levels and setting a new price target of 175p.
The upgrade provided a welcome boost to the stock, which climbed 4% to 124.1p.
Earlier this week, the food delivery company reported full-year results showcasing two significant milestones: its first-ever net profit and positive free cash flow. Adjusted earnings surged 52% to £130 million, and the company announced a new £100 million share buyback—equivalent to roughly 5% of its market capitalisation.
Full release is available at: http://www.rns-pdf.londonstockexchange.com/rns/4829A_1-2025-3-13.pdf
Investors, however, fixated on the cautious outlook, worrying about rising investment costs and intense competition. This sparked a sell-off, but Deutsche Bank sees this reaction as short-sighted. Deliveroo has been transitioning toward a more financially sustainable model, striking a balance between growth and profitability.
Despite the competitive landscape, the company’s expansion into groceries and retail, along with its efforts to enhance customer retention, signals a strong strategic position. Deutsche’s verdict? The long-term growth trajectory remains intact, and the current valuation presents an attractive opportunity.
Will Shu, Founder and CEO of Deliveroo, said:
“Over the past year, we have been relentlessly focused on making the Deliveroo experience even better. The robust results we’ve announced today, with our first full year profit and positive free cash flow as well as GTV growth across our verticals, demonstrate that our strategy is working. We continued to deliver value to consumers by incentivising partners to reduce mark-ups and by significantly enhancing our loyalty programme. Our dedication to making every order perfect is having a meaningful impact on consumer satisfaction, as reflected in our net promoter score.
Whilst the consumer environment remains uncertain, I am confident that we can continue to deliver growth by focusing on the levers in our control: supporting our restaurant partners to meet untapped consumer demand around new occasions, expanding our grocery and retail offering, and continuously improving our CVP. I want to thank the team for all their hard work and expertise in 2024 which will help us to capture the many opportunities ahead of us.”
