Synopsis: Zomato shares fell 9% to Rs 219 on the BSE, marking a year-to-date decline of 20%. IIFL Securities downgraded the stock with a revised target price of Rs 250, citing competitive pressures expected to peak in 2025. Analysts’ target prices for Zomato now range between Rs 140 and Rs 400 following Q3 results. Short-term profitability concerns linked to Blinkit’s expansion, but analysts remain optimistic about long-term growth.
Shares of Zomato Ltd faced a sharp decline, plunging 9% to Rs 219 on the Bombay Stock Exchange (BSE) on Tuesday.
This drop has extended the stock’s year-to-date decline to a significant 20%.
The downward trajectory comes on the back of less-than-expected December quarter results, prompting several analysts to revise their target prices.
Analysts’ Reactions and Revised Target Prices:
IIFL Securities downgraded its rating on Zomato from ‘Buy’ to ‘ADD’, reducing its target price from Rs 300 to Rs 250.
The brokerage cited increasing competition as a factor, with expectations that competition will peak by 2025 before Zomato’s long-term growth story unfolds.
Nuvama emphasized Blinkit’s accelerated dark store additions, which are driving faster growth.
However, this expansion comes with higher upfront costs, potentially delaying short-term profitability.
Despite this, Nuvama maintained a ‘BUY’ rating with a revised target price of Rs 300, down from Rs 325, as it rolled over to FY27 estimates.
Other notable target prices include:
- CLSA: Rs 400
- BofA Securities: Rs 375
- UBS: Rs 320
- Nomura India: Rs 290
Nomura India identified Blinkit’s gross order value (GOV) market share and the continuation of a positive contributing margin as key factors to monitor.
Long-Term Outlook Amid Short-Term Challenges:
Kotak Institutional Equities highlighted that despite near-term losses, Blinkit remains well-positioned to leverage the growing penetration of quick commerce.
The brokerage retained its ‘Buy’ rating with a revised fair value of Rs 275, down from Rs 305.
MOFSL shared a similar sentiment, projecting revenue and EBITDA growth of 65.8% and 70.5% year-on-year for Q4FY25.
It maintained its ‘Buy’ rating with a target price of Rs 270, signaling optimism about Zomato’s long-term potential.
Conversely, Macquarie adopted a more cautious stance, setting a DCF-based target price of Rs 130.
The firm cited rising competition in quick commerce and limited margin of safety as reasons for its conservative outlook.
Conclusion:
Zomato’s stock performance reflects a complex interplay of short-term challenges and long-term growth potential.
While the December quarter results have spurred bearish sentiments, analysts remain divided on the stock’s future trajectory.
Blinkit’s rapid expansion and the competitive quick commerce landscape are key factors influencing Zomato’s profitability and market positioning.
Investors are advised to carefully consider the varying perspectives before making decisions.
