Streets Still Bullish on Zomato Stock as it Hits All-Time High

Shares of Zomato surged today as multiple global brokerage houses expressed a bullish outlook on the online food delivery platform, highlighting its strong growth in comparison to its primary competitor, Swiggy. At the latest count, Zomato’s shares rose by 1.91%, reaching Rs.202.65 apiece, just 1.3% shy of its 52-week high of Rs 207.3.

Brokerages’ Bullish Stance

Brokerage houses pointed out that Zomato is outpacing Swiggy in growth. Swiggy’s FY24 annual report revealed a 26% year-on-year (YoY) increase in gross order value (GOV), covering both food delivery and quick commerce. However, this growth lagged behind the previous year’s 36%. In contrast, Zomato’s adjusted revenue soared by 55.9% YoY, significantly higher than Swiggy’s 24% revenue growth.

Analysts also noted substantial growth in Swiggy’s food delivery GOV and quick commerce. Despite Swiggy’s expansion, including 487 dark stores in 26 cities compared to 530 in March 2024, Zomato’s performance remained superior, driving investor interest and optimism.

Analyst Recommendations

Several brokerage houses reaffirmed their positive outlook on Zomato. Target prices were set at Rs.248 and Rs.250 per share by different analysts, while another maintained an ‘overweight’ rating with a target of Rs.235, citing potential increased competition with Zepto’s recent $665 million funding round, which doubled its valuation to $3.6 billion. Recommendations for buying Zomato shares also included targets of Rs.204, Rs.206, and Rs.210, with a stop loss at Rs.195.

Analysts attributed Zomato’s higher growth to Blinkit, its strong quick commerce segment performance. They highlighted the company’s consistent operational improvements and its planned expansion as key factors driving their ‘buy’ calls, with target prices around Rs.230.

Performance and Moves

Zomato’s shares have been closely watched since its discussions with Paytm to acquire its ticketing business were confirmed. The stock has delivered a remarkable 63% return on a year-to-date basis and has risen over 170% in the past year, significantly outperforming the Nifty 50’s 26% increase during the same period.

In FY24, Zomato reported a positive EBITDA of $5 million. Zomato’s growth has been further boosted by its market leadership, pricing power, and reduced delivery costs, factors highlighted by analysts in their ‘buy’ calls with target prices around Rs.230.

Conclusion: In conclusion, brokerages remain optimistic about Zomato’s future, with strong growth indicators and expansions driving positive sentiment. Analysts suggest that any market corrections could present a valuable buying opportunity for long-term investors. As Zomato continues to outperform its rivals and expand its market presence, the company’s stock remains a top pick.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.