Deliveroo Share Price Forecast December 2021 – Time to Buy ROO?
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Shares of British online food delivery company Deliveroo (LSE: ROO) are in the red today, closing at 211.9p as of December 24th (17:51 GMT). Deliveroo investors had earlier hoped that the share price would outperform the market in 2021 following the company’s IPO at the beginning of the year. Unfortunately, DGE has lost around 25% of its value since the IPO. However, the company has made some notable progress in 2021 to the surprise of many investors.
Deliveroo – Technical Analysis
According to Deliveroo’s financial statement, the market cap of the company is at £3.926 billion with total assets worth £1.881 billion. Revenue for 2020 was at £1.19 billion with a profit margin of -19.01% compared to £771.80 million in 2019.
Oscillators such as Relative Strength Index (14)(23.1), Stochastic %K (14, 3, 3)(20.8), Commodity Channel Index (20)(−73.0), Average Directional Index (14)(45.0) and Awesome Oscillator (−48.2) are neutral. Moving averages such as Exponential Moving Average (10) (218.8), Simple Moving Average (10)(214.8), Exponential Moving Average (20)(234.0) and Simple Moving Average (20)(236.8) are indicating a sell action.
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Recent Developments
Deliveroo released its last update in October where the company estimated its gross transaction value to grow 60%-70% this year and a gross profit margin increase of 7.5%-7.75%. The company’s average order value slightly decreased. This can be seen as good as it can indicate that customers are willing to order delivery even on low ticket items. On the flip side, it could also be bad for Deliveroo’s economics if it means the same cost base needs to be covered by lower.
The company has made significant progress in 2021 where many investors doubted that the company could sustain the 2020 levels of demand throughout this year. The company has proved everyone wrong by maintaining that demand and growing further. Deliveroo has capitalised on this rising demand by increasing the number of products on its platform. It has started several growth initiatives such as striking new agreements with suppliers and launching a service for Amazon Prime users.
Should You Buy ROO Shares?
Investors can expect Deliveroo’s top line and order volume will continue to expand in 2022 just by Looking at the company performance over the last 12 months. Given the cost challenges ahead, it will be interesting to see how the company’s bottom line will evolve. Deliveroo has always relied on self-employed couriers to deliver its products. However, the legal framework regarding this is starting to change.
Both in the UK and EU, Policymakers are making changes that will alter the rights of these workers. If implemented, it can alter Deliveroo’s corporation’s cost base, as it is forced to pay an hourly minimum wage, sick pay and offer time off. This can be why the Deliveroo share price has been under pressure during the past few months. The uncertainty regarding the company is hurting the share price.
Investors should be cautiously optimistic about the outlook for the stock in 2022, considering all of the opportunities and risks Deliveroo is dealing with. When the company announced its IPO, very few investors thought it would maintain the growth rate as previously expected. Deliveroo proved them wrong. There are ample signs that the company will be able to navigate the challenges facing the food delivery industry and come out on top in 2022. This means that the share price might surge next year. Considering all of this, now can be the perfect time to add ROO shares to your portfolio.
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