Just Eat Takeaway.com

Just Eat Takeaway.com (AMS: TKWY, LSE: JET) is a titan in the global online food delivery arena. Born from the 2020 mega-merger of the UK’s Just Eat and the Netherlands-based Takeaway.com, this company operates a vast digital marketplace connecting millions of hungry customers with hundreds of thousands of restaurants. Headquartered in Amsterdam, its orange-branded couriers are a common sight across Europe, Canada, and Australia. The company's core business acts like a digital landlord, charging restaurants a commission for orders placed through its platform. However, it also operates its own logistics network to deliver for restaurants that don't have their own drivers. This hybrid model allows it to dominate many key markets, but it has also faced significant challenges. For investors, JET's story is a fascinating case study in the dynamics of `network effects`, fierce competition, and the difficult art of `capital allocation` in the fast-paced tech world.

JET’s operations can be boiled down to two primary models, each with different economic characteristics.

This is the company’s traditional and most profitable engine. In this setup, JET acts purely as an intermediary. It provides the app, the website, and the marketing muscle to bring in customers, and in return, it takes a commission—the `take rate`—on the value of each order. The restaurant is then responsible for preparing the food and handling the delivery itself. This is a beautiful, high-margin business because it requires very little `capital expenditure` (capex). Think of it like a software business: once the platform is built, each additional order costs very little to process, leading to fantastic `scalability`.

To expand its reach to restaurants without their own delivery staff (like McDonald's or local fine-dining spots), JET also runs its own delivery service. This is the model that puts those swarms of orange-jacketed couriers on the streets. While it significantly increases the number of restaurants available on the platform—strengthening the overall offering—it's a much tougher business. It involves the heavy costs of employing or contracting riders, buying equipment (like e-bikes and thermal bags), and managing complex logistics. Consequently, the profit margins on these orders are much thinner, and sometimes even negative, especially in hyper-competitive markets.

For a value investor, JET is a classic “battleground stock,” with compelling arguments on both sides. The key is to weigh its powerful competitive advantages against the very real risks and management's track record.

The primary attraction for an investor is JET's powerful `economic moat`, built on the foundation of network effects. In the food delivery business, size matters. More customers on the app attract more restaurants, which in turn offer more choice, attracting even more customers. This virtuous cycle creates a formidable barrier to entry. In its core markets—like the UK, Germany, the Netherlands, and Canada—JET holds the #1 or a strong #2 position. Once a market matures and the land-grab phase of intense marketing spend subsides, a dominant player like JET can start to flex its pricing power and generate substantial `free cash flow` (FCF). The bull thesis rests on the belief that the company can successfully transition from a “growth-at-all-costs” mindset to one of disciplined, profitable operations.

The bears, however, point to a litany of concerns.

• Fierce Competition: The food delivery space is notoriously competitive. Rivals like `Uber Eats` and `DoorDash` are deep-pocketed and aggressive, leading to constant pressure on marketing budgets and take rates, which suppresses profitability.
• The Grubhub Saga: The 2021 acquisition of US-based `Grubhub` for $7.3 billion is a textbook example of questionable capital allocation. Bought at the peak of the market, the US business has struggled against dominant rivals. This led to massive `goodwill impairment` charges (writing down the asset's value on the balance sheet) and years of investor pressure on management to sell it, even at a significant loss. This decision alone has cast a long shadow over management's credibility.
• Path to Profitability: While management often points to positive `Adjusted EBITDA`, the company has struggled to generate consistent, meaningful net profit or free cash flow. The low-margin logistics business is a constant drag, and critics argue that the “adjusted” profits ignore real costs like stock-based compensation.

When digging into JET's financial reports, an investor should focus on these key performance indicators (KPIs):

• Gross Transaction Value (GTV): This is the total monetary value of all food orders placed through the platform before any deductions. It's the best measure of the company's overall scale and market share. An increasing GTV is a healthy sign.
• Orders: The total number of orders processed. Looking at the growth in orders and the average order value (GTV / Orders) tells you about user activity and spending habits.
• Revenue: This is the portion of GTV that JET actually keeps (GTV x Take Rate). It's the true top line of the business.
• Adjusted EBITDA: This is management’s preferred measure of profitability. While useful, always be skeptical. It excludes items like interest, taxes, depreciation, amortization, and often stock-based compensation. Always compare it with unadjusted net income and, most importantly, free cash flow.
• Free Cash Flow (FCF): For a value investor, this is arguably the most important metric. It represents the cash the business generates after paying for operating expenses and capital expenditures. A company that consistently generates positive FCF is a healthy one.