LONDON (Reuters) - Investors gave their backing to Just Eat’s (JE.L) global growth drive on Thursday, sending its shares higher even though new investments in Brazil and Mexico will weigh on the takeaway group’s full-year core earnings.
Just Eat has grown rapidly since it floated in 2014 but it spooked investors this year by repeatedly hiking the amount it needs to spend to fend off rivals Deliveroo and Uber Eats in markets stretching from Canada to Australia and the UK.
On Thursday it said investments in Brazil and Mexico would push 2018 underlying core earnings to the lower end of the 165 million pound to 185 million pound range, despite revenue forecast at the top end of a 740 million pounds to 770 million pound range.
Its shares jumped 6 percent from a one-year low, valuing the group at 4.3 billion pounds ($5.6 billion) as analysts said the rapid growth at the top line of the service justified the investment in the network and brand.
“To us, this is exactly the right approach,” analysts at Liberum said in a note.
“While Just Eat is the market leader in nearly all the markets in which it operates, the food delivery market has not fully transformed yet from phone to online and so the emphasis should be on growing share and growth generally.”
Early last month, Deliveroo reported a deeper pre-tax loss for its full financial year after it invested a further 100 million pounds to expand into new markets
Just Eat reported a better-than-expected 16 percent rise in British orders to 30.3 million in the third quarter, driven by strong trading in September. Group orders were up 27 percent to 54.7 million and overall revenue rose 41 percent.
“The group has delivered another strong quarter as we helped our 97,000+ restaurant partners serve over 54 million takeaways to millions of hungry customers,” Chief Executive Peter Plumb said.
Founded in Denmark in 2001 by five entrepreneurs, Just Eat’s platform originally connected customers with local takeaway restaurants which generally provide their own delivery service, unlike competitors Deliveroo and Uber Eats.
As the market has developed, however, Just Eat has trialled using its own delivery riders in some key markets including Britain, while Deliveroo has started to work with restaurants that deliver their own meals, increasing the potential market, and overlap, for both groups.
Reporting by Kate Holton; Editing by Susan Fenton/Sarah Young and Emelia Sithole-Matarise