Jefferies initiates Talabat Holding stock with Buy rating on growth outlook

Jefferies has initiated coverage on Talabat Holding (TALABAT:AE) with a Buy rating and a price target of AED2.10, citing robust growth prospects and significant margin expansion potential. The firm anticipates Talabat's 2025-27 gross merchandise value (GMV) growth to surpass company guidance, positioning it as a global sector leader, and projects 2025-27 EPS 1-5% above consensus due to increasing advertising technology penetration. Jefferies highlights Talabat's attractive valuation at 11.2x 2026 EV/(EBITDA-SBC) with a 7.1% free cash flow yield compared to peers, alongside a potential progressive dividend yield exceeding 5.0% and modeled 2025 dividends of approximately US$450 million.

Analysis

Jefferies has initiated coverage on Talabat Holding (TALABAT:AE) with a bullish outlook, assigning a 'Buy' rating and an AED2.10 price target. The firm's positive thesis is anchored in expectations that Talabat's gross merchandise value (GMV) growth for 2025-2027 will outperform both company guidance and sector peers globally. This top-line strength is projected to be complemented by margin expansion, driven by the increasing penetration of advertising technology, which is expected to more than offset elevated marketing expenditures. Consequently, Jefferies' earnings per share estimates for 2025-2027 stand 1-5% above consensus. From a valuation perspective, the stock is viewed as attractive, trading at 11.2x 2026 EV/(EBITDA-SBC) with a robust 7.1% free cash flow yield. The analysis is further bolstered by a significant capital return potential, with Jefferies modeling approximately US$450 million in dividends for 2025 and forecasting a progressive dividend yield that could surpass 5.0%.

Key Decisions for Investors

• Investors seeking growth should consider Talabat's potential for sector-leading GMV expansion and above-consensus earnings, as highlighted by Jefferies' initiation note.
• The combination of a favorable valuation, a strong 7.1% free cash flow yield, and a potential dividend yield exceeding 5.0% presents a compelling case for investors looking for both growth and income.
• Key metrics to monitor in upcoming reports include the rate of ad-tech penetration and its impact on margins, as well as any official company announcements regarding its progressive dividend policy.