Zomato shares surged 4% in early trading on September 12, 2024, reaching an all-time high of ₹283.50 on the Bombay Stock Exchange (BSE). This marks a continuation of a robust performance, as the stock has gained 15.6% over the past six trading sessions, reflecting strong investor confidence bolstered by positive analyst ratings and strategic business moves.
Analyst Optimism and Growth Prospects
Global brokerage firm UBS has played a significant role in driving this bullish sentiment, reaffirming a ‘buy’ rating for Zomato with a target price of ₹320, suggesting a potential upside of 17.5% from its previous close. UBS highlighted the company’s strong growth prospects, noting that industry volumes in the food delivery sector grew by 2.5% month-on-month in August 2024. Despite Zomato’s order growth of 1.8% lagging behind Swiggy’s 3.1% during the same period, UBS emphasized Zomato’s performance relative to previous months, showcasing a 25% increase compared to December 2023.
UBS anticipates a 7% quarter-on-quarter rise in Zomato’s Gross Merchandise Value (GMV) for Q2FY25, further indicating the company’s robust operational trajectory. The firm attributed part of Zomato’s recent success to its acquisition of Paytm’s events and movie ticketing business, which has been integrated into its existing services, enhancing its market position.
Competitive Landscape
The competitive dynamics between Zomato and Swiggy remain a focal point for analysts. While Zomato has been gaining traction, the ongoing “push-and-pull” battle in the food delivery space continues to shape market expectations. Notably, Jefferies has also expressed optimism, setting a target price of ₹335 for Zomato, which reflects a potential upside of 31%. The firm predicts a compound annual growth rate (CAGR) of 20% in Zomato’s delivery revenue from FY24 to FY27, driven by innovative initiatives and strategic expansions, particularly in metro regions.
Financial Performance
Zomato’s financial results have further fueled investor enthusiasm. The company reported a consolidated net profit of ₹253 crore for the quarter ending June 30, 2024, a significant leap from just ₹2 crore in the same quarter the previous year. Revenue surged nearly 74% year-on-year to ₹4,206 crore, with the Gross Order Value (GOV) increasing by 53% to ₹15,455 crore. Such performance metrics underscore Zomato’s effective business strategies and market adaptability.
Future Outlook
Looking ahead, the prospects for Zomato appear promising. Analysts from major brokerage firms are optimistic about the company’s ability to navigate the competitive landscape and capitalize on growth opportunities. The integration of its dining services with the newly acquired ticketing business is expected to enhance its revenue streams and customer engagement.
As Zomato continues to innovate and expand its offerings, the stock’s trajectory will likely depend on its ability to maintain growth momentum in a competitive environment. The current bullish sentiment, supported by strong financial results and analyst endorsements, suggests that Zomato may continue to gain further in the coming weeks.
In conclusion, Zomato’s recent performance, coupled with positive analyst forecasts and strategic acquisitions, positions the company favorably in the food delivery market. Investors are advised to monitor ongoing developments closely, as the competitive dynamics with Swiggy and market conditions will play crucial roles in shaping Zomato’s future stock performance.
Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the Business Headline Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.
