Food delivery platform Deliveroo (ROO) raised its full year GTV (gross transaction value) steer after strong first half trading continued into the third quarter.

The app-based business said it expects GTV to rise by between 60% and 70% this year to 31 December 2021, instead of the 50% to 60% previously forecast.

In the third quarter, GTV surged 54% to £1.5 billion, with orders up 64% to £74 million. GTV is the entire cost of meals bought over the platform, while orders are Deliveroo’s cut of those meals.

GTV per order fell 6% to £21.40, with average order values returning to pre-pandemic levels, but the company stuck with its gross profit margin forecast for this year in the 7.5%-to-7.75% range.

AMAZON/MORRISONS TIE-UPS

The three months to 30 September was a big deal for Deliveroo’s partnerships strategy as it looks to expand its addressable market beyond takeaways.

During the quarter, the tech platform partnered with Amazon to offer the latter’s Prime customers in the UK and Ireland a year’s unlimited free delivery on orders over £25/€25 through free Deliveroo Plus membership.

According to Megabuyte analysts, Deliveroo Plus members represented 15% of UK/Ireland monthly active customers, yet this number more than doubled by the end of September thanks to successful conversion of existing Deliveroo customers to Plus and onboarding new ones.

The company also launched ‘Deliveroo Hop’, a tie-up with supermarket chain Morrisons (MRW) to deliver groceries via the app. ‘Deliveroo Hop will operate from delivery-only grocery stores and will enable rapid grocery deliveries in as little as 10 minutes and a wider product range,’ said Megabuyte’s Vinay Bhardwaj.

This rapid delivery offering will sit alongside Deliveroo’s existing on-demand grocery service.

‘The consumer value proposition continues to evolve as seen by quarter-on-quarter growth in restaurant and grocery numbers as Deliveroo expands in large cities (share gains in Marseille and Rome) and increasingly into small cities,’ said Numis analysts. They pointed out that Deliveroo is now operating in all UK towns with 50,000-plus populations.

CONFIDENCE VOTE IN DELIVERY MODEL

‘Today’s upgraded guidance is a solid vote of confidence in Deliveroo,’ said Megabuyte’s Vinay Bhardwaj, and ‘results demonstrate the resilience of the food delivery market as order growth continues to remain at elevated levels despite the easing of lockdown restrictions further confirming the shift in consumer behaviour in a post-pandemic world.’

‘Third quarter momentum leaves the near-term consensus forecasts increasingly well underpinned while strong execution, including progress on new initiatives and expansion into smaller towns and cities, reassures on the longer-term growth outlook which we don’t see fairly reflected in valuation,’ concluded Numis.

The broker has a 440p share price target on the stock, nearly 50% above today’s 300.6p level, after rallying 3.5% in response to today’s news.

READ MORE ABOUT DELIVEROO HERE

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Issue Date: 20 Oct 2021