Delivery Hero is a classic growth stock. The food delivery service founded ten years ago leaves no doubt about this attribute. Already on the fourth page of a recent company presentation, CEO Niklas Östberg sums up the top priority: "Growth". At the same time, the co-founder of the e-commerce group puts a green tick behind the target of a short- to medium-term growth rate of more than 40% issued at the IPO in mid-2017. Even in the long term, Östberg is aiming for more than 30%. At the moment, the Berliners are easily making it over both benchmarks. After the number of orders rose by 93% in 2020, the first half of the current period saw an increase of 83.2%. At EUR 16.2 billion, the gross merchandise value (GMV) from January to June 2021 was almost 80% higher than in the previous year (see chart). In the second quarter of 2021 alone, Delivery Hero counted 730 million orders. In purely arithmetical terms, this means that more than 90 delivery orders were received on the e-commerce group's portals every second.
Despite its operational superlatives, Delivery Hero has been stuck on the stock market for some time. The DAX share started the year at an all-time high. The high that started in the wake of the Corona pandemic peaked at EUR 145.40 on January 5, 2021. Starting from this top, the share price went into a sideways movement. In the process, the area around the EUR 100 mark crystallized as a chart support. Fundamentally, the rather unanswered question of whether and when Delivery Hero will be able to break even is a stumbling block for the large cap. Management wants to break even with the help of economies of scale and automation. In the long term, the Berliners are targeting an operating margin (adjusted Ebitda level) of between 5% and 8% of GMV.
The road to this goal is rocky: in the first half of 2021, the operating loss of EUR 323.3 million was even slightly higher than in the same period of the previous year. Increased investments in staff expansion, marketing and the expansion of the logistics network made themselves felt here. Delivery Hero is also expanding in the new "Q-Commerce" business segment. In this segment, the premise is to deliver groceries and household goods to best sellers within less than 20 minutes. The company now has almost 700 such warehouses (Dmarts) in 37 countries. In order to be able to satisfy its hunger for growth, Delivery Hero is constantly raising fresh capital. At the beginning of September, the issue of two convertible bonds brought in a gross EUR 1.25 billion. There seems to be no shortage of uses for the money: Delivery Hero reported three transactions in October alone. Most recently, the group invested USD 235m in a minority stake in Gorillas. The Berlin-based start-up delivers food particularly quickly in more than 55 cities spread across nine countries.
Despite the recent deals, the EUR 28 bn e-commerce group remained true to its sideways trend. As the stock zig-zags within the outlined corridor, it shows comparatively high volatility. This, in turn, is reflected in the terms of two new softcallable barrier reverse convertibles: In the product currency CHF, the issue comes with a guaranteed coupon of 13% p.a.. The EUR-denominated counterpart pays 20 basis points more. The barriers are uniformly set at 59% of the initial level. The structure matures after one year at the latest. Prior to that, the issuer can pull the softcallable function after six or nine months. In the event of early termination, investors would receive the full nominal together with a pro-rata coupon. Caution: As soon as Delivery Hero breaks out below and touches or falls below the barrier, the partial protection expires. In this scenario, the investment would be directly linked to the Underlying.
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