On-demand food ordering and delivery platform provider Waitr Holdings Inc. (WTRH) operates through Waitr and Bite Squad mobile applications in the United States. WTRH’s expanded delivery options and a growing footprint in new markets, with more than 25,000 restaurants on its platform, have facilitated a surge in average daily orders. WTRH’s average daily orders rose 2.5% sequentially to 38,583 for the second quarter of 2021.

However, WTRH’s stock has slumped 19.6% in price over the past month to close yesterday’s trading session at $0.94. Also, the stock is currently trading 79.5% below its 52-week high of $4.57. 

Although the food delivery company’s recent investment in a mobile banking blockchain application as a payment option for its customers, and acquisitions in the fintech sector could bode well for the stock, its underwhelming financials and unchanged active diner growth rate in its last reported quarter could be alarming.

Here’s what could influence WTRH’s performance in the coming months:

Strategic Acquisitions and Partnerships

Last month, WTRH completed the acquisitions of three payment processing companies--Cape Cod Merchant Services, ProMerchant, and Flow Payments. The move should enable the company to cater to a growing customer base in the European market. These acquisitions should further supplement its offerings and help WTRH  provide a suite of payment services to its ecosystem.

Also last month, the company partnered with Smoothie King to manage deliveries from more than 350 Smoothie King locations. In addition, the companies intend to leverage co-branding marketing opportunities in select markets. In addition, WTRH teamed up with KBP Foods, a franchisee of KFC, to begin deliveries from more than 140 KBP locations around the country.

Uncertain Growth Prospects

A $47.54 million consensus revenue estimate for the current quarter, ending September 30, 2021, represents a 9.8% decrease year-over-year. Analysts expect WTRH’s revenue to rise 2.9% year-over-year to $48.2 million in the next quarter. However, its revenue is estimated to decline 4.1% from the prior-year period to $195.85 million in the current year.

Also, analysts expect WTRH’s EPS to decline 150% in the current quarter and 120% next quarter. But the consensus EPS estimate for fiscal 2022 represents a 46.2% increase from the year-ago value. Furthermore, its EPS is estimated to grow at a 20% rate per annum over the next five years.

Unstable Financials

WTRH’s total revenue declined 18.7% year-over-year to $49.17 million in the second quarter, ended June 30, 2021. The company’s operating loss came in at $3.09 million, versus a $13.85 million operating loss in the second quarter of 2020. Furthermore,  its net loss from continuing operations stood at $5.64 million, while its loss per share totaled $0.05 over this period. The company’s adjusted EBITDA declined 84.9% year-over-year to $2.52 million. Also, WTRH’s net change in cash was  negative $24.16 million for the six months ended June 30, 2021.

Its 11.5% trailing-12-month EBITDA margin is 9.7% lower than the 12.7% industry average. Also, WTRH’s 4.3% and 0.9% respective ROTC and asset turnover ratio are 42.7% and 17.2% lower than the industry averages. Moreover, its ROE and ROA are negative 2.6% and 0.9%, respectively.

Consensus Price Target Indicates Potential Upside

The $5.70 consensus price target represents a 507.1% potential upside from yesterday’s closing price of $0.94.

POWR Ratings Reflect Uncertainty

WTRH has an overall C rating of C, which translates to Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight distinct categories. WTRH has a C grade for Quality. The stock’s lower-than-industry EBITDA margin is in sync with this grade.

The  company has an F grade for Growth, which is in sync with its inadequate growth prospects. In terms of Value Grade, WTRH has a B. The company’s 0.8 EV/Sales ratio is 47.5% lower than the 1.47 industry average, which is consistent with the grade.

In addition to the grades we’ve highlighted, one can check additional WTRH ratings for Momentum, Stability, and Sentiment here. WTRH is ranked #42 of 76 stocks in the F-rated Internet industry.

Bottom Line

WTRH’s continued addition of a variety of national brands to its platform and its strategic acquisitions in the fintech sector could  lead to significant improvement in its customer base and help diversify its product offerings. However, its weak balance sheet and uncertain growth prospects could cause its shares to retreat further in price in the near term. So, we think investors should wait for its growth prospects to improve before investing in the stock.

How Does Waitr Holdings (WTRH) Stack Up Against its Peers?

While WTRH has an overall POWR Rating of C, one might want to consider taking a look at its industry peers, Yelp Inc. (YELP), Cars.com Inc. (CARS), and Blucora, Inc. (BCOR), which have a B (Buy) rating.

WTRH shares rose $0.01 (+1.18%) in premarket trading Wednesday. Year-to-date, WTRH has declined -65.83%, versus a 17.82% rise in the benchmark S&P 500 index during the same period.

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.

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