Zomato’s stock took a hit, dropping 13% to an intraday low of ₹207.80 on the NSE after the company reported a 57.2% decline in consolidated net profit for the December quarter to ₹59 crore. This marks a significant drop from the net profit of ₹138 crore recorded in the year-ago period.
Brokerages remain optimistic about Zomato’s long-term prospects despite challenges in the short-term. The focus on growth for Blinkit and store expansion has impacted profitability, but the management remains confident in the company’s strong demand and execution. Bank of America reiterated a ‘buy’ rating on Zomato with a target price of ₹375, acknowledging Blinkit’s growth focus and strong demand. Nomura also maintained a ‘buy’ call, albeit with a reduced target price of ₹290, highlighting the competition in the quick commerce space.
ICICI Securities noted that the lower profitability is a result of accelerated store expansion, while Nuvama Institutional Equities pointed out that the addition of dark stores for Blinkit may impact profitability in the short term but is expected to drive profitability in the future. Despite some challenges, both brokerages maintained a ‘buy’ rating on Zomato with target prices of ₹310 and ₹300 respectively.
CLSA and UBS also expressed confidence in Zomato, with CLSA reiterating an outperform rating and a target price of ₹400, and UBS assigning a ‘buy’ rating with a target price of ₹320. JM Financial analysts highlighted weaker-than-expected margins in Blinkit and Going-out verticals but noted strong growth in the Hyperpure segment. They maintained a buy rating on Zomato with a revised target price of ₹280.
Motilal Oswal sees a 13% upside potential and reiterated a buy call on Zomato with a target price of ₹270. However, Jefferies downgraded its rating to hold with a lowered target price of ₹255.
Zomato’s shares plummeted 9.36% on the NSE to trade at ₹217.30 and 9.71% on the BSE to ₹217.55. The market cap of the company eroded to ₹2.09 crore. Similarly, shares of Zomato’s rival Swiggy also dropped sharply by 11% to hit an intra-day low of ₹427.05 on the NSE.
Overall, despite the short-term challenges, brokerages see Zomato’s long-term potential and remain optimistic about the company’s growth trajectory. Time will tell how Zomato navigates the current challenges and capitalizes on future opportunities in the food delivery space.
