European food delivery sector seeing recovery in economic backdrop, BofA says

Investing.com – The European food delivery segment is tipped to see steady improvement in sentiment in 2025 as the macroeconomic environment shows signs of slowly recovering, according to analysts at Bank of America.

In a note to clients, the analysts said the sector stabilized in 2024 after grappling with a “difficult” trading backdrop in recent years. The industry’s share prices in Europe rose by 6% last year following a 25% decline in 2023, they noted.

“Both underlying performance and sentiment should continue to recover in 2025 as online penetration resumes, cost-of-living pressures ease, while rates in the UK and Europe could soon be cut – improving sentiment around long-duration assets like e-commerce,” the analysts wrote.

They added there are multiple, industry-wide trends contributing to an expansion in the total addressable market for food deliverers, including a push into new ventures like on-demand grocery and retail deliveries.

The comments come after Deliveroo (OTC:DROOF) said last week that it had “robust” growth in its final quarter, highlighted by a 7% jump in gross sales on the platform. Annual earnings would be near the top of its forecasted range, the group added, as it was boosted by improved orders and an uptick in customer spending.

Adjusted core earnings are seen at the top end of its 110 million pound – 130 million pound guidance band, while the business said that it would be free cash flow positive for 2024, meeting expectations.

Deliveroo is expected to benefit from a growing grocery and advertising business that will help drive around 10% top-line compound annual growth through 2027, the analysts predicted.

Meanwhile, peer Just Eat Takeaway’s sale of its Grubhub unit “removes a key overhang” for the stock, de-risks its balance sheet, and shifts the focus back on to the company’s strong operations in Northern Europe, the brokerage said.

Delivery Hero, on the other hand, faces multiple perceived risks, including intensifying competition in South Korea, the rise of Chinese player Meituan in Asia and a new, pricier employment-based rider model in Spain, the analysts added.

They reinstated their coverage of the three firms, placing “buy” ratings on Deliveroo and Just Eat Takeaway and giving Delivery Hero an “underperform” outlook.