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Despite some ups and downs, it’s been a largely flat month for the FTSE 100 index. Over 30 days, it has gained around 60 points (0.9%). However, some Footsie constituents have seen their shares slump recently. For example, shareholders of Just Eat Takeaway.com (LSE: JET) must wonder what’s going on, as the Just Eat Takeaway share price has been in freefall since mid-April.
The Just Eat Takeaway share price crashes 22%
A month ago, on 15 April, the Just Eat Takeaway share price closed at 7,974p. There it hovered until 23 April, when it started sliding in a three-week decline. On Friday, JET stock closed at 6,227p. That’s a slump of almost 1,750p, leaving the shares down more than a fifth (21.9%) in just 30 days.
JET shares crashed and then soared in 2020
JET only joined the FTSE 100 in February 2020, following Takeaway.com’s purchase of Just Eat. Here’s how the Just Eat Takeaway share price has performed over five different periods:
As you can see, the share price has declined over all five periods, losing more than a quarter (26.7%) of its value over the past year. What’s more, as with many UK shares, JET stock had a volatile 2020. As Covid-19 infections swept the globe, the JET share price took a dive. On 12 March 2020, JET stock plunged to a closing low of 5,505p. Four days later, it fell to an intra-day low of 5,345p. But then the shares staged a serious comeback.
The peak for the Just Eat Takeaway share price came on 16 October. The shares hit an intra-day high of 10,050p and a closing high of 9,980p. When the stock was flying high, a single JET share cost roughly £100. Today, with the shares at 6,227p, JET stock has lost almost two-fifths (38%) of its value since its October peak. Why has the share price slumped since then, while the rest of the UK market has soared?
Tech stocks are tumbling
One problem for the Just Eat Takeaway share price is that this stock is very highly valued. Although the Anglo-Dutch company specialises in online food orders and home delivery, it’s regarded as a tech/growth stock. Thus, it’s valued in line with risky US tech stocks. Many of these loss-making companies are ‘all promise and no profit’, but some investors are willing to pay high prices for future growth. And, when the market turns, these high-risk, high-reward stocks often get clobbered the hardest.
What’s driving this sell-off in richly rated stocks? Markets are starting to worry about the threat of higher inflation (rising consumer prices). If inflation remains persistently high in a post-Covid boom, then central banks may have to tighten monetary policy or raise interest rates. This would drive up borrowing costs, making the valuations of growth companies look relatively more expensive. In a nutshell, it is this inflation situation that has crashed the Just Eat Takeaway share price recently.
On a more positive note, sales are soaring at JET. Thanks to lockdown restrictions, first-quarter orders for 2021 jumped by 79% to 200m, versus forecast growth of 42%. In the UK alone, Q1 orders were over 63.8m. But would I buy JET at the current price? No, because I’m an old-school value investor looking to invest in profitable companies with hefty cash flows and fat dividends. Hence, I will leave this ‘jam tomorrow’ stock to growth and tech investors!
The post The Just Eat Takeaway (JET) share price crashed 22% in a month. What happened? appeared first on The Motley Fool UK.
Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has recommended Just Eat Takeaway.com N.V. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2021