The shares of many food delivery services were able to achieve significant price gains in 2020 to 2022 due to the stay-at-home trend during the Covid pandemic. However, with the reopening of restaurants and the increasing normalization of everyday life, some of these stocks have come under significant pressure in the last one to two years and are currently trading at comparatively low price levels, which may now represent favorable long-term buying opportunities. In this article, we present the delivery service sector and a selection of some delivery service stocks from the USA and Europe in detail.
THE DELIVERY SERVICE MARKET AT A GLANCE
Delivery services have spread very quickly in recent years and established themselves as an important component of a modern lifestyle, especially in urban areas. This trend has accelerated in many European countries as well as in the USA due to the temporary forced closure of restaurants in 2020 and 2021 and many people began to have food delivered to their homes on a regular basis.
Even though restaurants are now being frequented again, the trend towards regularly ordering food online or by phone is continuing for many people and the delivery service sector is likely to continue to grow.
Definition and delimitation of the market
A delivery service is a service that delivers products, in this case mainly food and meals, directly to customers. The market includes both restaurants and supermarkets that offer their own delivery services, as well as specialized delivery services that act as intermediaries between customers and suppliers. Recently, some of these services have also added the delivery of other goods such as household goods and medicines to their offering.
Emergence and development of the market
Delivery services have their origins in pizza deliveries, which have been around since the 1960s. But the real revolution began with the advent of the internet and smartphone technology, which enabled easy and convenient ordering via app. During the Covid-19 pandemic, the market experienced unprecedented growth due to restrictions and the stay-at-home trend.
MARKET GROWTH FORECAST AND DRIVERS
Experts continue to forecast strong growth for the delivery service market. Expansion into new geographical areas, particularly emerging markets, and the introduction of innovative business models are the main drivers of this growth. In addition, there are opportunities through the diversification of services, such as the delivery of food, medicines or household goods.
In 2023, the global online grocery delivery market is expected to reach a turnover of around one trillion euros. According to forecasts, the market volume could grow to 1.57 trillion euros by 2027, which corresponds to an expected annual sales growth of 12.08% (CAGR 2023-2027).
A key segment of this market is grocery delivery, which could record revenue growth of 21.8 % in 2024. This segment is expected to reach a volume of EUR 0.61 trillion in 2023 and thus account for the largest share of the entire market. Furthermore, the average revenue per user (ARPU) in the food delivery segment is expected to amount to EUR 438.10 in 2023.
Looking at the global market, it is worth noting that China will generate the largest turnover. Turnover of 386.3 billion euros is expected there in 2023.
In terms of the meal delivery segment, the number of users is forecast to increase to 2.45 billion by 2027. The penetration rate in this segment is expected to reach 25 % in 2023, underlining the significant growth potential of this sector as more and more consumers take advantage of the convenience and comfort of meal delivery services.
SELECTION OF WELL-KNOWN AND LARGE DELIVERY SERVICE SHARES AT A GLANCE
In the table below you will find an overview of some of the best-known and largest companies in the delivery service industry from various countries, followed by a detailed presentation of some delivery service stocks.
| Company | Symbol | Country | Market capitalization |
| Meituan | 3690 | China | 102.69 billion USD |
| Uber Technologies | UBER | USA | 79.29 billion USD |
| DoorDash | DASH | USA | USD 26.02 billion |
| Delivery Hero | DHER | Germany | USD 11.01 billion |
| Domino's Pizza | DPZ | USA | USD 11.04 billion |
| Zomato | ZOMATO | India | USD 6.68 billion |
| HelloFresh | HFG | Germany | USD 4.18 billion |
| Just Eat Takeaway | TKWY | Netherlands | USD 4.08 billion |
| Deliveroo Holdings | ROO | UK | USD 2.45 billion |
| Blue Apron Holdings | APRN | USA | USD 0.04 billion |
DELIVERY HERO
- Company: Delivery Hero SE
- Symbol (TWS): DHER
- ISIN: DE000A2E4K43
- Stock exchange: XETRA
- Country: Germany
- Currency: Euro
- Market capitalization: EUR 10.18 billion / USD 11.01 billion
- Turnover (TTM) in USD: 9.28 billion
Delivery Hero was founded in 2011 and is headquartered in Berlin. In August 2020, the company made the leap into Germany's leading index, the DAX, where it took the place of Wirecard. However, the company was relegated to the MDAX in 2022. Delivery Hero offers online food ordering and delivery services in around 50 countries worldwide. The company's well-known brands in Germany include Foodora, Lieferheld and Pizza.de. Delivery Hero's sales have grown rapidly in recent years and quarters, but the company is not yet making a profit.
Brief analysis & outlook
Delivery Hero shares rose from less than EUR 30 per share in 2017 to a price level of around EUR 140 in 2021. This was followed by a strong and rapid downward trend from December 2021 to May 2022, which caused the share price to fall below EUR 30 again. Since then, the share price has trended sideways and has not developed a clear trend. Although Delivery Hero has seen strong sales growth over the last five years, the company is not yet making a profit. Despite growth in 2022, turnover fell short of expectations. Nevertheless, the company is optimistic about the future and expects to make a profit in the 2023 financial year. Delivery Hero has introduced a number of cost-saving measures to improve its profitability, including the reduction of 4% of jobs in administration and 6.5% of jobs at its subsidiary Glovo. These measures could help reduce costs and further improve profitability. The US bank JPMorgan recently lowered its price target for Delivery Hero from EUR 65 to EUR 63, but left its rating at "Overweight".
DOORDASH
- Company: DoorDash Inc
- Symbol (TWS): DASH
- ISIN: US25809K1051
- Stock exchange: Nasdaq
- Country: USA
- Currency: US Dollar
- Market capitalization: USD 26.02 billion
- Turnover (TTM) in USD: 7.16 billion
DoorDash is the leading meal delivery service in the USA, where it has a market share of around 50 %. The company was founded in 2013 and is headquartered in San Francisco, California. DoorDash makes money by charging both restaurants and customers. The company's revenue has also surged in the last two years as many restaurants have been forced to have food delivered and pay the fees charged. Growth is also more important than profit for DoorDash in the current situation, which is why the company is not currently profitable.
Brief analysis & outlook
DoorDash shares have also stabilized in recent months following a very poor performance in 2022. Despite insider selling and growing competition, interest among investors has recently increased. Institutional investors and hedge funds have significantly increased their positions in DoorDash, including Two Sigma Investments LP and Trexquant Investment LP, which increased their positions by 184 % and 68.8 % respectively. Citizens Financial Group Inc RI also increased their position in DoorDash by 49.9%, highlighting their growing confidence in the company. Several research firms have also issued reports on the stock. Although JPMorgan Chase & Co. recently lowered its price target from USD 70 to USD 65 and gave the company a neutral rating, growth trends have recently been positive. In May 2023, the analysts' earnings expectations were significantly exceeded.
UBER
- Company: Uber Technologies Inc
- Symbol (TWS): UBER
- ISIN: US90353T1007
- Stock Exchange: New York Stock Exchange
- Country: USA
- Currency: US Dollar
- Market capitalization: USD 79.29 billion
- Turnover (TTM) in USD: 33.85 billion
Ride-sharing service Uber is another major player in the delivery industry with its meal delivery service Uber Eats. Revenue from the company's delivery business surged in recent quarters, helping to offset pandemic-related declines in its ride-sharing business. Uber has struggled with the same profitability issues as DoorDash. The delivery business remains unprofitable, even though revenue from the service is growing rapidly. With Uber stock, investors are not only investing in a pure food delivery service, but also in the business model of transporting passengers.
Brief analysis & outlook
Uber delivered strong results in the first quarter of 2023, boosting investor sentiment. The company reported revenue growth of $29% to $8.8 billion, beating analyst expectations and recording its seventh consecutive quarter of profitability on an adjusted EBITDA basis. Uber's monthly active platform users (MAPCs) increased by 13% to 130 million, and the number of rides increased by 24% to 2.1 billion.
Uber's margins and cash flows have also increased. With an increase in the adjusted EBITDA margin from -4.4% in 2021 to 8.6% in the first quarter of 2023 and an improvement in free cash flow from negative USD 743 million in 2021 to positive USD 549 million in the first quarter of 2023, the company shows a solid profitability development. Analysts forecast that Uber's full-year revenue will increase by USD 16% to USD 36.9 billion.
DOMINO'S PIZZA
- Company: Domino's Pizza Inc
- Symbol (TWS): DPZ
- ISIN: US25754A2015
- Stock Exchange: New York Stock Exchange
- Country: USA
- Currency: US Dollar
- Market capitalization: USD 11.04 billion
- Turnover (TTM) in USD: 4.55 billion
Domino's Pizza is a fast-food pizza chain with over 18,000 locations worldwide. The company offers pizzas under the Domino's brand name in company-owned and franchise branches. Domino's Pizza is headquartered in the US state of Michigan and was founded in 1960. Compared to the competitors mentioned above, the company does not rely on external delivery partners. As a result, Domino's saves on fees and has complete control over the delivery process and customer experience. Despite the strong increase in competition from companies such as DoorDash and the resulting increase in the range of products available to end customers, Domino's Pizza has recently been able to increase its sales.
Brief analysis & outlook
Domino's Pizza shares were unable to benefit from the positive overall market environment in the first half of 2023. One reason for this is the last two quarterly results, which fell short of expectations. In particular, the forecasts were worse than expected and the share price fell significantly on both occasions immediately after the earnings were announced. Despite the bad news, there are also positive aspects of Domino's that are worth mentioning. The growth rate of 4% to 8% per year over the next two to three years is above the growth rate of 3.9% in 2022. In addition, the company's recent price adjustments seem to be bearing fruit, as earnings per share have increased year-on-year in the last two quarters. In addition, Domino's is committed to an attractive dividend policy, having recently raised its quarterly dividend by 10%, suggesting potential for further dividend growth in the coming years, as the company currently only pays out around a third of its profits as dividends.
HELLOFRESH
- Company: HelloFresh SE
- Symbol (TWS): HFG
- ISIN: DE000A161408
- Stock exchange: XETRA
- Country: Germany
- Currency: Euro
- Market capitalization: EUR 3.86 billion / USD 4.18 billion
- Turnover (TTM) in USD: 8.34 billion
HelloFresh is a Berlin-based meal delivery company founded in 2011. The company offers and ships boxes for the preparation of home-cooked meals according to its own recipes. In addition to many European countries, HelloFresh also offers its products in the USA, among others, where it is one of the leading companies among meal kit providers.
Brief analysis & outlook
HelloFresh had already prepared its investors for slower growth in the current year in March 2023. The reasons for this are the end of the "corona delivery boom", rising inflation rates and declining consumer purchasing power. The modest increase in the first quarter brought turnover to 2.02 billion euros, which corresponds to a currency-adjusted increase of 3.3%. However, operating profitability suffered under the given conditions. Adjusted EBITDA fell to 66.1 million euros, which corresponds to an EBITDA margin of 3.3 percent compared to 5.2 percent in the same period of the previous year. In addition, an operating loss of EUR 9 million and a net loss after tax of EUR 25.1 million were reported. Despite the challenges of the first quarter, HelloFresh remains optimistic for the year as a whole. The company forecasts a slowdown in currency-adjusted revenue growth to 2 to 10 percent, compared to 18 percent in 2022, and expects an adjusted operating profit of 460 to 540 million euros, compared to 477 million euros last year.