The Deliveroo (ROO) share price erased some of its previous gains as investors reflected on the stellar earnings by the food delivery company. The stock initially jumped to a multi-month high of 380p and then declined sharply to 354p.
On Monday, we wrote favourably about Deliveroo ahead of its earnings. In the article, we also speculated that the company’s cheap valuation would likely push a bigger company to acquire the firm. A few minutes after the article went live, the Deliveroo share price jumped after Deliveroo announced that it had acquired a 10% stake in the company.
And on Wednesday, Deliveroo announced strong quarterly and half-year results. The embattled company said that its orders more than doubled in the first half of the year as it added more merchants. Its Gross Transaction Value (GTV) increased by more than 102% to 3.35 billion pounds helped by a 110% increase in UK and Ireland.
Revenue rose by 82% to more than 922 million pounds while its gross profit rose to more than 263 million pounds. As a result, the company upgraded its forward guidance. It expects that its gross transaction value will rise by between 50% and 60%.
Still, the company said that it expects that its business will start to normalise as more people start dining out. The CEO said:
“As reflected in our guidance, whilst we expect that consumer behaviour may moderate later in the year, we remain excited about the opportunity ahead and our ability to capitalise on it.”
As I wrote on Monday, there is a possibility that more institutional investors will start embracing the company. In a note, an analyst with eToro said:
“The takeaway delivery service’s shares have risen strongly over the past five months since its disastrous March IPO, dubbed the ‘worst in London’s history’, netting ‘day one’ investors a return of nearly 30pc.”
Deliveroo share price forecast
The three-hour chart shows that the Deliveroo share price has been in a strong bullish trend in the past few days. And today, the stock almost tested its all-time high at 390p. The stock is attempting to do a break and retest pattern by moving close to the support at 338p. It is still above the short and longer term moving averages while the MACD has maintained the bullish momentum.
Therefore, the overall thesis is that ROO shares will keep rising in the near term. This will be confirmed if it moves above the all-time high of 390p. Nonetheless, a sustained dip below the support at 338p will invalidate the bullish view.