Zomato’s stock has faced a steep decline, dropping over 23% in the past month, and continuing its downward trend with a 14% drop in the last two sessions. The recent fall follows the company’s disappointing Q3FY25 earnings, where its consolidated net profit plunged 57% to Rs 59 crore, compared to Rs 138 crore in the same period last year. While Zomato’s revenue from operations grew by an impressive 64.39% to Rs 5,405 crore, it wasn’t enough to offset the profit decline. Additionally, the company’s adjusted EBITDA showed a 128% year-on-year growth, though it fell 14% quarter-on-quarter, mainly due to increased investments in new dark stores as part of its expansion strategy.
Despite the poor short-term performance, analysts remain optimistic about Zomato’s long-term prospects, largely due to its quick commerce division, Blinkit. Brokerages like Nomura, Jefferies, and Bernstein continue to be bullish on the company’s future growth potential, citing Blinkit’s strong position in the rapidly expanding quick commerce sector. However, the company’s short-term outlook may be impacted by rising competition and ongoing investments in infrastructure, particularly in dark stores. Brokerages such as Nuvama Institutional Equities and Jefferies have recently reduced their target prices for Zomato, indicating that they expect near-term losses due to the rapid expansion.
The stock’s recent decline may raise concerns, investors with a long-term outlook might still view the dip as a buying opportunity, especially with Blinkit’s promising future. However, the stock could face continued volatility in the short term, driven by high investments and stiff competition in the quick commerce space. Therefore, cautious investors may prefer to avoid or wait for a clearer trend before making a decision.
