Wirecard out of the DAX, Delivery Hero in?

August 21, 2020 14:00

After recent developments surrounding Wirecard and its bankruptcy, the German stock exchange, Deutsche Boerse, had to change some of its rules in regards to removing insolvent companies from the German DAX.

From August, 21st, insolvent companies can be removed from the DAX with two trading days' notice, adding that this rule change would apply to Wirecard, "given the current situation" after the company collapsed into insolvency in June, admitting 1.9 billion euros went missing from its balance sheet.

Have not made any money since 2011 - is Delivery Hero a worthy Wirecard successor?

While Deutsche Boerse will not officially decide which company will replace Wirecard in the DAX until August 21st , signs intensified in recent days that the Berlin-based food supplier DeliveryHero (#DHER) has the best prospects to follow Wirecard and join the DAX.

What is certainly interesting here is that DeliveryHero is not doing any business in Germany after it sold its German business to Dutch competitor Just Eat Takeaway ("Lieferando") in 2019 for around 1 billion Euro.

The company then invested the money in the Middle East and North Africa, mainly driven by the fact that in 2019 nearly half of total sales (~ 1.2 billion euros) came from these regions.

While it remains to be seen whether this move plays out in the long run, it remains a fact that DeliveryHero has not made any money since it was founded in 2011, but still has a market value of around 20 billion Euros.

When looking closely at DeliveryHero, the story of the company reflects that of Wirecard's with the DeliveryHero stock currently seeing a significant run higher since it announced that it expects revenues of 2.6 and 2.8 billion euros in 2020 due to the Corona-crisis. In fact, this outlook is positive and nearly twice as high as it was in 2019.

From its March lows around 50 Euros, the stock has nearly doubled, currently trading above 100 Euros. With rising attention among market participants with a promotion into the DAX, the recent trend could certainly continue.

Still, we remain cautious: if Equity markets around the globe are hit by another wave of risk off due to rising speculation of a second lockdown or, ultimately, the implementation of one, shares could tumble more aggressively than the broader market.

How to trade #DHER in this environment?

Technically, as long as #DHER trades above 89.00 Euro and its SMA(200), the stock will remain bullish and has further upside potential.

But, a significant drop back below 100 Euro and a break below 89.00 would send a clear warning message to bulls. It could probably be seen as a sign of bears stepping in and targeting a deeper corrective move to as low as 80 Euros:

Source: Admiral Markets MT5 with MT5SE Add-on #FB chart (between March 25, 2019 to August 19, 2020). Accessed: August 19, 2020 at 2:00 PM GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2017, the value of #DHER increased by 16.8%. In 2018, it decreased by 1.5%, and in 2019, it rose 117.1%, meaning that after 2.5 years, it was up by 149.7%.

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