Dusseldorf Despite doubling annual sales, Delivery Hero did not make a profit in 2021 either. While many analysts continue to rate the delivery service positively, criticism from shareholders is increasing – for example at the upcoming virtual general meeting on Thursday.
Cornelia Zimmermann, specialist for sustainability and corporate governance at Deka Investment, states: “Delivery Hero did not deliver any heroic figures for 2021”. She criticizes that the food delivery service has lost trust with a “business-political lurching course”.
After the group withdrew from the German market after a few months in December, the share price was “further driven down”. This is also due to “the ongoing losses”. In the past financial year, Delivery Hero burned 1.075 billion euros before taxes and duties.
One problem for the business model is likely to be the continued rise in inflation. Deka published a list of 20 critical questions for the Annual General Meeting. The fund company settles accounts with the management of the food delivery service: “Sales growth alone has not been enough for us for a long time, profits must finally be made,” warns Zimmermann.
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Positive view from analysts – retail investors hold back
Marc Liebscher, lawyer and board member of the Protection Association of Investors eV (SdK), also criticizes Delivery Hero. The SdK is skeptical that the group will still benefit from economies of scale “The hope that sales growth will lead to margin growth is diminishing,” he says.
In 2021, the group doubled its sales to 5.8 billion euros. However, Liebscher finds it “astonishing that profitability has hardly increased at all”. Delivery Hero is a “share for very risk-conscious investors”. Crucial to that are, according to Liebscher, the continuous losses and the lack of positive economies of scale.
In addition, “delivery hero unfortunately still has a start-up mentality”. Annual reports were published late, and the number of orders was no longer specified in the first quarter report. The group “loses transparency and credibility through such blunders,” criticizes Zimmermann from Deka Investment.
Many analysts, on the other hand, believe in the business model. Banks such as Goldman Sachs, UBS and Barclays Capital recommend buying Delivery Hero shares. While the share is currently worth less than 32 euros, the analysts are targeting prices of 70 to 125 euros.
Although Barclays lowered the target price to EUR 69.50, i.e. the level at the beginning of February, it left the rating at “Overweight”. She advises overweighting the stock in the portfolio. The Landesbank Baden-Württemberg also recommends the purchase, but lowered the price target from 64 to 44 euros.
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Only JP Morgan and Deutsche Bank Delivery Hero rate neutral. The Deutsche Bank analyst advises holding the shares with a price target of EUR 50. Data from South Korea, where the group bought the Woowa service in 2021, showed demand levels were at risk due to higher delivery fees.
US investor: “Delivery Hero has no soul”
US investor Kevin Carter is more relaxed. He holds almost 160,000 shares in Delivery Hero through his funds FMQQ and the emerging markets fund EMQQ, which he runs with the investment platform HANetf. The EMQQ is currently up around 23 percent. His fund FMQQ has lost up to 39 percent in value since it was launched in January 2022.
He is not surprised that Delivery Hero’s share price has fallen: “All comparable services have fallen by around 70 percent”. Some online delivery services would have to sell their shares in other companies.
Carter has no intention of selling his shares in Delivery Hero. His buying criteria for shares are simple: “As long as the shares are publicly traded, the company does e-commerce and has a market capitalization of more than $300 million, I’ll buy it.” The fact that Delivery Hero is loss-making is not a problem for investors: “Amazon has Asked for money for 20 years because it was an unprofitable bookstore.”
However, he sees a structural problem in the development of Delivery Hero. The group has grown differently than a start-up by a company founder that grows organically: “Delivery Hero has no soul,” says Carter. The food supplier has grown primarily through the acquisition of competitors. This means that the group has a harder time than traditional, successful start-ups.
He finds the step of withdrawing from the German business logical. Because “if they want to grow, they have to go more to developing countries where labor costs are lower,” says Carter.
For Marc Liebscher from the Protection Association of Investors, this raises labor law issues. Delivery Hero’s business model “is based on drivers being poorly paid,” says the investor protector. In some regions, however, minimum wages would be introduced, in others the drivers would strike for better pay, for example at a subsidiary in Dubai.
>> Read here: For Delivery Hero, the descent from the Dax a blessing
Cornelia Zimmermann from Deka Investment has a number of critical questions about Delivery Hero’s “Fair Pay Initiative” that she wants to ask at the Annual General Meeting: “We expect Delivery Hero to make a commitment that living wages will also be paid in low-wage countries.”
Delivery Hero: Last general meeting as a Dax member
The general meeting on Thursday will be the last one for Delivery Hero as part of the Dax40 for the time being. On June 20, the group will leave the Dax after Deutsche Börse has adjusted its criteria for the allocation of Dax places. This means that Delivery Hero’s time in the top group of German stock corporations ends after less than two years.
Marc Liebscher had already criticized the inclusion of Delivery Hero in the Dax: “They were included without making any profits.” capital market”.
For US investor Kevin Carter, these criteria are not important. Carter only found out that Delivery Hero was leaving the top group of the Dax in a conversation with the Handelsblatt.
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