Deliveroo Shares Rose on Q4 2023 Trading Update, but Later Fell

The Deliveroo PLC (LON: ROO) share price rose 2.69% after releasing its Q4 2023 trading update, which showed that its Gross Transaction Value (GTV) for FY 2023 aligns with earlier projections, while adjusted EBITDA slightly exceeds expectations.

Specifically, the GTV experienced a 3% growth, meeting the forecast of lower single-digit percentage growth on a constant currency basis. Adjusted EBITDA is anticipated to surpass the estimated range of £60-80 million.

During the fourth quarter of 2023, the company maintained resilient GTV growth, witnessing a 4% year-on-year increase in constant currency. Order numbers showed a modest improvement, remaining steady compared to the previous year. Although food price inflation has moderated, the GTV per order marked a 4% year-on-year rise in constant currency.

The company saw continued growth in the UK and Ireland (UKI) and a resurgence in international markets. The UKI segment reported a 7% year-on-year GTV growth. Though slightly lower than in Q3, this growth was attributed to deliberate strategies like managing restaurant partnerships to enhance consumer trust through reduced mark-ups and improved operational performance. 

Internationally, GTV returned to a growth trajectory, registering a 1% year-on-year increase in constant currency, bolstered by positive trends in most markets and notable strength in Italy and the UAE.

Revenue growth, however, lagged behind GTV growth at 1% in constant currency. This discrepancy is attributed to a shift in marketing strategy, favouring promotional marketing activities (which are accounted for as contra revenue) and selective investments in consumer fees. These initiatives aim to capitalise on the ongoing stabilisation of consumer behaviour.

The Deliveroo share price had given up all its gains at writing and traded in negative territory. 

Will Shu, Founder and CEO of Deliveroo, said: “I’m really proud of the team's execution in Q4, including launching our retail offering. We delivered a good performance in UKI and saw an International return to GTV growth, with encouraging trends in several markets. As we saw ongoing signs of stabilisation in consumer behaviour in the quarter, we continued to invest in the consumer value proposition to lay the foundations for future growth.”

Deliveroo share price. 

The Deliveroo share price rose 2.69% to trade at 137.6p from Thursday’s closing price of 134.0p.

On Wednesday, ahead of today's trading update, Barclays analyst Andrew Ross raised Deliveroo to Overweight from Equal Weight, raising the price target to 155p from 145p per share. The analyst told investors in a note that Deliveroo's growth should improve in 2024, and it should see margin upside in the mid-term.