Goldman Sachs initiates Deliveroo with a ‘buy’ rating, sees 70% upside

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By Samuel Indyk – Analysts at Goldman Sachs (NYSE:) have initiated UK-based food delivery company Deliveroo (LON:) with a ‘buy’ rating in a recent research note.

The US investment bank has a 12-month price target of 420 pence, implying 70% upside.

“We forecast 5-year GTV (gross transaction value) and gross profit CAGRs of 26% (from 2020-2025 est),” Goldman Sachs analyst Rob Joyce said in a research note.

Joyce added that the entire achievable market of the UK online food delivery service is not yet particularly penetrated, while data on potential customers is strong at the same time.

The research note comes a month after a disappointing debut for Deliveroo on the London Stock Exchange.

Major UK investment funds shunned the IPO over fears regarding the company’s business model and potential regulation that could impact how the company classifies its riders.

On the opening two days of trading, Goldman Sachs bought about £75mln worth of shares to support the share price but they still tumbled by over 30% on the first day of trading.

The positive feeling on shares from Goldman Sachs is at odds with other analysts too. Independent research firm, The Analyst, said last month that shares in Deliveroo could still fall another 40% before a bottom is reached.

“We looked at Deliveroo in January when an IPO was first mooted and it was obvious then that the company was operating in a highly competitive market and was facing legal challenges to its labour practices on multiple fronts,” The Analyst’s Mark Hiley said.

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At 09:45BST, shares in Deliveroo were trading 3.8% higher at 256.40 pence per share.

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