For the past year or so, Just Eat has been on a rollercoaster journey through the stock markets. When it first entered the FTSE 100 in November 2017, it did so with a valuation of £5.5bn – making it more valuable than Marks & Spencer, Morrisons and Sainsburys.
Fading Star
But between July 2018 and December 2018, its share price dropped by almost 40 per cent, as the food delivery firm struggled to ward off competition from the likes of Deliveroo and Uber Eats. In December, it was unceremoniously dumped out of the FTSE 100, and into the less-exclusive FTSE 250. But surprisingly strong full-year results have sparked speculation that the firm will re-enter the FTSE 100 during the next FTSE reshuffle at the end of March.
Trading Opportunity?
For short term traders, this presents both a headache and an opportunity. While hindsight is irrelevant in the world of trading, it can’t have escaped notice that Just Eat’s share price has increased substantially since its relegation in December (when shares were 586.80) to 6 March 2019 (776.80), the day the full-year results were announced.
That’s a price increase of more than 32 per cent in just three months.
If the company re-enters the FTSE 100 in a few weeks’ time, the share price is likely to rise even higher. Indeed, it still has some way to go before it matches its all-time share price high of 890.00.
Prospects
So, what are the chances of Just Eat re-entering the FTSE 100?
According to the company’s latest trading statement – high.
On March 6 2019, Just Eat released its 2018 full-year trading results, with sales rising by 44 per cent. The Underlying EBITDA of the group rose by £10m over the past year, to £173m. This brings its market capitalisation to £5.28bn – still higher than Marks & Spencer and Sainsbury’s (Morrisons has pulled slightly ahead).
However, day traders should be aware of a few potential headwinds at the firm. Deliveroo and Uber Eats are still putting pressure on the Just Eat business model, forcing Just Eat to make some costly changes, such as allowing restaurants to do their own deliveries. This could impact significantly on the company’s overall earnings.
The firm is also in the process of hiring a new CEO, almost two months after Peter Plumb stood down. A change of leadership could bring with it a change in strategy and this too could have an effect on the company’s share price and FTSE 100 prospects.