Analysts believe Zomato’s stock can deliver up to 51% returns from the current levels despite lingering concerns over a second straight quarterly decline in food delivery volume at the Gurugram-based food-tech firm.
Jefferies has the most bullish view on the stock and believes Zomato’s unit economics to steadily improve as scaling up unlocks cost efficiencies in addition to customer willingness to pay higher convenience fees.
BofA Securities upgraded the stock as it saw improving visibility on net income profitability going ahead. “Sustained cost control and revenue recovery set the path for re-rating,” it said in a client note.
Zomato’s shares rose as much as 3.65% in Monday’s trading but surrendered all their gains. The stock closed the session at ₹62.30 on the NSE, down 3.41%. As many as 160 million shares exchanged hands on the BSE and NSE, nearly 1.8 times its combined average daily volume over the last month.
After market hours on Friday, Zomato reported its fourth-quarter earnings that saw consolidated losses narrow to ₹188 crore from ₹360 crore from the year-ago period, and ₹345 crore a quarter ago. The net loss was much lower than the market expectation of ₹356 crore. The consolidated revenue increased 70% year-on-year to ₹2,056 crore.
Morgan Stanley, which anticipates a near 30% upside potential from the current levels, also sees a strong outlook and profitability at the consolidated level for the next four quarters but felt disappointed with the sequential drop in core business GOV (gross order value) and revenue.Meanwhile, Nomura and Citigroup cut their respective price targets. In fact, Nomura lowered growth assumptions for the food delivery vertical and anticipates Zomato’s shares to fall more than 30% from the current level.
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