Synopsis: Zomato and Paytm shares rebounded 2-3% after a significant 13-20% selloff. Aggressive expansion strategies, particularly in Zomato’s quick commerce segment, contributed to the recent stock correction. Paytm’s Q3 performance showed improvement in business metrics despite challenges in contribution margins. Analyst targets for Zomato range between Rs 140 and Rs 400, while Paytm is projected between Rs 950 and Rs 1,250 by various brokerages.
Shares of Zomato Ltd rose 3.21% to Rs 223.40 in Thursday’s trade after facing a steep decline of 19.37% year-to-date. HSBC attributed the recent stock correction to heightened losses due to aggressive store additions. The quick commerce sector, represented by players like Zomato’s Blinkit and Swiggy, has seen corrections driven by rising losses from rapid supply expansion.
Blinkit, Zomato’s quick commerce business, added 216 stores in Q3 alone, taking the total store count to over 1,000. The company plans to expand this figure to 2,000 by the end of FY2025. While this aggressive strategy has weighed on short-term profitability, analysts believe it may yield benefits in the long run. HSBC projected that the worst impact of this expansion would be felt in Q4 FY2025, with improvements expected thereafter.
Brokerage firms have varied price targets for Zomato:
- CLSA: Rs 400
- BofA Securities: Rs 375
- UBS: Rs 320
- Nomura India: Rs 290
- Kotak: Rs 275 (revised from Rs 305)
- MOFSL: Rs 270
Key monitorables for Zomato include Blinkit’s gross order value (GOV) market share and the continuation of positive contribution margins.
Paytm’s Resilience Amid Challenges
Paytm shares climbed 2.59% to Rs 862.90 on Thursday, recovering from a recent selloff attributed to higher default loan guarantee (DLG) costs, which impacted Q3 contribution margins. Despite these challenges, analysts noted improvements in key business metrics such as gross merchandise value (GMV) and loan disbursements, which are recovering from Q1 lows.
YES Securities and Emkay Global have set a target price of Rs 1,050 for Paytm, while JM Financial values the stock at Rs 1,250. MOFSL retained a neutral rating, estimating Paytm to turn EBITDA positive by FY2027 and valuing it at Rs 950 based on 18 times FY30E EBITDA discounted to FY26E.
Year-to-date, Paytm’s stock has declined by 13%, with a series of dips earlier this week. Analysts remain optimistic about its long-term growth trajectory as business fundamentals improve.
Conclusion:
The recent rebound in Zomato and Paytm shares reflects market confidence despite ongoing challenges. Zomato’s aggressive quick commerce expansion strategy has led to short-term losses but holds promise for future profitability. Paytm, on the other hand, is showing steady improvement in key business metrics, with analysts predicting long-term growth. Investors are advised to monitor these developments closely as both companies navigate their respective challenges.
Disclaimer:
This article is for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
