Highlights
Shares of Zomato, a significant player in the food tech industry, fell by 5% today, trading at Rs 253. This decline follows a downgrade by the foreign brokerage Jefferies, which lowered its rating for Zomato from “buy” to “hold,” citing increased competition in the quick commerce sector.
Price Target Adjustments
Jefferies has revised its target price for Zomato down to Rs 275 from Rs 335, suggesting a limited upside potential of only 1%. The brokerage has indicated that this year is likely to be one of consolidation for Zomato’s operations.
Earnings Forecast Reduction
Key adjustments to financial projections include:
- 12% reduction in EBITDA for FY26
- 15% reduction in EBITDA for FY27
- 17% decrease in net profit estimates for FY26
- 18% decrease in net profit estimates for FY27
- 20% reduction in earnings per share (EPS) projections for FY26
- 21% reduction in EPS projections for FY27
In addition, Jefferies has lowered Blinkit’s EBITDA forecast for FY26-27 and flagged potential profitability challenges. It has also halved the target multiple for Zomato’s quick commerce division to 6X.
Contrasting Ratings from Other Brokerages
Despite Jefferies’ downgrade, international brokerage Morgan Stanley has retained its ‘Overweight’ rating on Zomato, setting a target price of Rs 355. Furthermore, Bernstein has identified Zomato as one of its top stock picks within its Indian Strategy, according to recent reports.
Recent Financial Performance
During the second quarter of the current fiscal year, Zomato demonstrated impressive performance with:
- 68.5% quarter-on-quarter growth in operating revenue, rising from Rs 2,848 crore to Rs 4,799 crore in Q2 FY24.
- A notable 4.8 times increase in net profit, reaching Rs 176 crore for the quarter ending September.
Zomato’s stock reached a 52-week high of Rs 304.7 on 9 December 2024 and a 52-week low of Rs 121.6 on 18 January 2024. As of 11:40 AM today, shares are trading at Rs 253.3, with a total market capitalisation of Rs 2,44,395 crore (approximately $29 billion).