Zomato stock rises 3% as Q4 loss narrows. Should you buy or sell now?

Zomato trimmed its January – March quarter losses to Rs 188 crore from Rs 360 crore a year ago, and Rs 345 crore a quarter ago. The consolidated revenue increased a whopping 70% YoY to Rs 2,056 crore. The net loss was much lower than the estimated Rs 356 crore.

The revenue, however, was a tad lower than the estimated Rs 2,122 crore. In FY23, Zomato’s loss narrowed to Rs 971 crore from Rs 1,209 crore a year ago. Revenue increased 69% to Rs 7,079 crore.

Brokerages Goldman Sachs and Emkay have maintained a ‘Buy’ rating on the counter, whereas Nomura has a ‘Reduce’ stance on it. Take a look:

Goldman Sachs: Buy | Target: Rs 82
The foreign brokerage has a ‘Buy’ stance on the stock for a price target of Rs 82. The company’s Q4 earnings were better than Goldman Sachs’ expectations on several metrics. The brokerage noted improving growth and profit outlook.

Emkay: Buy | Target: Rs 90
We maintain BUY on Zomato with a TP of Rs 90/share. The superior Q4 performance bolsters our belief in Zomato’s ability to execute & deliver profitable growth. Improvement in consumer sentiment is expected to drive GOV/MTU growth.

Nomura: Reduce | Target: Rs 45
Nomura maintains a ‘Reduce’ on Zomato shares with a price target of Rs 45, implying a 30% downside. We factor in a weaker FD business outlook and stronger Q-commerce growth, and higher CM margin in food delivery leading to a lower EBITDA loss in FY24F. Our DCF-based target price of Rs 45 remains unchanged. Achieving high GOV growth and strong CM improvement in core FD business remain challenging, in our view. Key risks: stronger-than-expected GOV growth in FD business and quicker break-even in Q-commerce.BofA: Buy | Target: Rs 85
BofA has an ‘Upgrade’ rating on Zomato with a price target at Rs 85. The brokerage highlighted improving visibility of net income profitability, going ahead. It said that Zomato implemented strong execution on cost control. Sustained cost control and revenue recovery set the path for re-rating.

Morgan Stanley: Overweight | Target: Rs 74
Morgan Stanley remains ‘Overweight’ on the stocks with a target of Rs 74. It said that the company missed on GOV and revenues in core business, but strong profitability beat on Zomato Gold. Good growth and margin performance in Blinkit was seen in the reporting quarter. Strong outlook and profitability at the consolidated level in the next four quarters is seen.

Kotak Institutional Equities: Buy | Target: Rs 82
Kotak has tweaked its estimates and cut food delivery FY2024-25E revenue estimates by 5-11% driven by slow industry growth, 2% yoy growth in AOV every year and higher CM. We retain BUY. Overall, higher profitability broadly offsets the lower revenue growth resulting in an unchanged FV of Rs 82, roll-forward to March 2024E notwithstanding.

Motilal Oswal: Buy | Target: Rs 80
We remain positive on the long-term growth opportunity for Zomato, and do not expect competition to intensify further despite the entry of ONDC in the space. Our DCF-based valuation of INR80/sh suggests a 24% upside from current price. We reiterate our BUY rating on the stock.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)