Deliveroo squeezed by belt-tightening consumers

Deliveroo shares charged 6 per cent higher on Monday after the food delivery company issued a warning on order growth due to facing “increased consumer headwinds” in the second quarter.

If the reaction of investors seems illogical, Alphaville explains order sizes are shrinking in a barely growing market, but selling less means earnings forecasts go up for this unprofitable business. RBC Capital Markets now expects a £118mn full-year loss, versus a previous forecast of £132mn.

Deliveroo said growth slowed to 2 per cent in the second quarter, down from 12 per cent in the first three months of 2022. It slashed its guidance for growth in full-year revenues or gross transaction value to a range of 4 to 12 per cent, down from 15 to 25 per cent.

A cost of living crisis has squeezed household budgets and created very different conditions compared to the stay-at-home ordering binges that Deliveroo benefited from during the pandemic.

But Alphaville says Deliveroo still has plenty of cash — around £1.1bn — to see it through bad times and towards its aim of getting to free cash flow positive.

The same can’t be said for China’s grocery delivery start-up Missfresh, which is fighting to survive as it shuts operations across China, wallows in an accounting scandal and searches for capital to sustain its business.

Shares of the Nasdaq-listed company have lost 97 per cent of their value since its IPO in June last year at a $3bn market capitalisation, Missfresh had expanded into 16 Chinese cities where it ran 625 warehouses to enable deliveries within 30 minutes, as of June 30 last year. But a person close to Missfresh told our reporters the company had “blindly expanded, blindly opened new warehouses and blindly entered new cities”. 

This year, Missfresh has moved to close down its mini-warehouses in at least nine cities. In a further blow delivered to shareholders, it announced this week it would be diluting them to raise fresh capital — issuing 300mn shares to a Shanxi coal mining group for Rmb200mn ($30mn) for a 30 per cent stake.

The Internet of (Five) Things

1. Fintech investors take flight
Almost half a trillion dollars has been wiped from the valuation of once high-flying fintechs that took advantage of the boom in initial public offerings earlier in the pandemic. More than 30 fintechs have listed in the US since the start of 2020, according to CB Insights data, but their shares have fallen an average of more than 50 per cent since the start of 2022. Measured against their all-time highs, around $460bn has been lost.

2. Facebook-Giphy deal gets fresh review
The UK competition regulator will have to revisit its decision to block Facebook’s parent Meta from buying gif platform Giphy after a ruling by the Competition Appeals Tribunal on Monday. The tribunal ruled the CMA had failed to consult properly during its probe and had also wrongly redacted material from its final decision.

3. Binance fined in Holland
The Dutch central bank has fined Binance more than €3mn for offering services without proper registration in a blow to the crypto exchange’s campaign to win over European regulators. The central bank said on Monday that the world’s largest crypto trading platform had breached its rules, which require digital asset companies to register in order to offer services in the Netherlands.

4. Musk seeks to push back Twitter court date
Elon Musk has accused Twitter of an “unjustifiable request to rush” the trial to determine whether he should be forced to complete a $44bn deal to buy the social media company. Musk has suggested a trial start in February at the earliest, according to a court filing, That is several months later than the September timing being pushed for by Twitter.

5. Virgin-TalkTalk bid talk
Virgin Media O2 is reported to have made a bid of about $3bn for smaller rival TalkTalk, as UK telecoms groups seek to bulk up in a highly competitive and fragmented market.

Tech week ahead

Monday: The tech earnings season begins this week, with IBM leading off after the closing bell on Monday with its second-quarter results.

Tuesday: Netflix is next up, with investors keeping a keen eye on subscriber numbers after they disappointed for the streaming service in Q1. They will also be looking for updates on the launch of its cheaper, ad-supported service.

Wednesday: Tesla reports Q2 results.

Thursday: Camera app Snap has Q2s.

Friday: Amid all the Musk brouhaha, Twitter reports Q2 earnings.

Tech tools — LG Gram 16 and +view

The LG Gram series of laptops has been around since 2015, with their incredible lightness being the standout feature. The first models came in at just under a kilogramme and while the 2022 LG Gram 16 weighs 1.2Kg, it still feels light as a feather compared to the equivalent MacBook Pro, which is a full kilogramme heavier.

New features and upgrades for this year’s update include an antiglare IPS display, a webcam that’s now Full HD and 12th Gen Intel Core processors. New software adds facial recognition for logins and AI noise cancelling for clearer calls.

Battery life remains great at between 13 and 22 hours depending on usage. The 16:10 display is still large and vibrant, but the Gram’s light weight means sound is sacrificed a little and lacks oomph. I was also not a big fan of the keyboard when I tried it. While the big trackpad is smooth as silk and the separate numeric keypad is useful to have, the keyboard is consequently compromised in size and positioning and I found the function keys too small and dependent on having to press the fn key as well.

The best addition this year is the matching +view 16in portable monitor, which connects to the Gram’s USB-C port to double your working space. Normally £299, it comes free till the end of the month when bundled with the £1,499 Gram 16. There are also Gram 17, 15 and 14 models and 2-in-1 options.