Just Eat Takeaway faces indigestion after another mega deal, and Moneysupermarket faces its own lockdown pressures

“A combination of central bank support, the easing of lockdown and hopes of progress towards a coronavirus vaccine have helped support a giddy rally in global stocks in the last two-and-half months with US indices coming close to pre-correction highs,” says AJ Bell Investment Director Russ Mould.

“Last night’s economic projections from the US Federal Reserve hit the markets like a glass of cold water in the face with the sobering assessment from chair Jerome Powell that there will be ‘a long road’ to economic recovery in the wake of the pandemic.

“Investors are forward-looking by nature but they may now be questioning just how far they have to look forward for a tangible recovery in corporate earnings.

“A sell-off which started across the Atlantic overnight continued with a vengeance as markets opened in Europe with the FTSE 100 down 2% and dragged lower by the big oil stocks BP and Shell both falling more than 4% apiece.

“This mirrored significant declines in oil prices with global benchmark Brent just a touch above $40 per barrel. Gold prices were steady and precious metals miners Fresnillo and Polymetal were among the best performers in London, reflecting appetite for traditional safe havens.”

Just Eat Takeaway

“The ink is barely dry on the merger between Just Eat and Takeaway.com and now management are hungry for more deals. Snapping up Grubhub might strategically make sense as it expands the company’s reach, but there is a fear of indigestion by rushing to do another massive deal when arguably Just Eat and Takeaway.com won’t have had time to properly integrate.

“Doing too much too fast can backfire and parking two businesses together is always harder than boardrooms anticipate. Synergies are often over-estimated and integration tasks under-estimated, not to mention the potential for culture clashes.

“Just Eat Takeaway says Grubhub is the only rival that is ‘culturally similar’ to itself, yet it is hard to make such statements unless you know the company inside out. The marketplace business model may be the same, but it is easy to have a different business culture.

“Competition is fierce in the online food ordering and delivery sector and it does seem as if there are too many players. While they are serving a growing market, arguably you need scale in order to make a profit. Just Eat Takeaway is therefore on a land grab mission.

“Lockdown measures around the world will have accelerated demand for online food ordering. However, the risk of widespread unemployment could have a negative impact in the coming months and almost certainly in 2021 if households are having to watch their spending.

“Ordering takeaway food is a luxury that many people won’t be able to afford if they are out of work. Just Eat Takeaway will have to ride through this likely difficult patch and its move on Grubhub is more about setting itself up for the long term.”

Moneysupermarket

“While an entirely online business like comparison site Moneysupermarket has been in the enviable position of being able to operate throughout lockdown, today’s trading statement shows it has not exactly been business as usual.

“This is reflected both in the continued suspension of forward guidance, the absence of any activity on travel-related products and the significant pressure on its money division as lenders withdraw products from the market.

“Government pressure may see this situation reverse as the banks are encouraged to support a financial recovery and elsewhere the company is already seeing some recovery in motor insurance switching as people return to the roads.

“The main bright spot in this latest update from Moneysupermarket is home services, which makes sense given how much time we are all spending indoors and our increased reliance on reliable and affordable broadband services.

“Like other operators in the price comparison space, Moneysupermarket is unveiling services which switch to the best deal automatically. The launch of an energy auto-switching service on its MoneySavingExpert site is imminent.

“The benefit for the business is that it should help retain switchers and ultimately could reduce the heavy marketing spend required to attract them.

“It will be interesting to see how central this is to incoming chief executive Peter Duffy’s strategy when he replaces current incumbent Mark Lewis in September.”

These articles are for information purposes only and are not a personal recommendation or advice.