Zomato’s stock has skyrocketed by 105% year-to-date, more than doubling investors’ returns. In contrast, the benchmark Nifty 50 has increased by 14% over the same period.
Zomato Stock Reaches New Heights After Strong Q1 Results
On August 2, Zomato stock soared nearly 19% to hit a record high of Rs 278.70, fueled by enthusiastic investor reactions to the company’s stellar earnings report for the quarter ending June 2024. All segments of the food aggregator demonstrated significant growth, contributing to the impressive rise in Zomato’s stock value.
Zomato’s financial performance for Q1FY25 was remarkable, with net profit surging to Rs 253 crore, marking an extraordinary 12,550% increase compared to the same quarter last year. Revenue from operations also saw a substantial boost, rising by 75% year-on-year to reach Rs 4,206 crore. This impressive performance reflects the company’s robust growth trajectory and its ability to capitalize on market opportunities.
Brokerages have responded positively to Zomato’s performance, adjusting their target prices upwards in light of the company’s strong results. Analysts at Motilal Oswal have expressed confidence in Zomato’s food delivery business and view Blinkit as a significant opportunity to disrupt sectors such as retail, grocery, and e-commerce. The brokerage has reaffirmed its buy rating for Zomato stock and set a discounted cash flow (DCF) target price of Rs 300, based on a 12.5% cost of capital.
Zomato Stock Shows Resilient Performance and Analyst Optimism
At 12:19 pm on August 2, Zomato stock was trading about 12% higher at Rs 260.78 on the National Stock Exchange (NSE), with the company’s market capitalization briefly surpassing Rs 2.5 lakh crore. This surge underscores the strong investor confidence in Zomato’s growth potential.
The quarter under review revealed a significant turnaround in Zomato’s financial metrics. The company’s EBITDA for Q1FY25 reached Rs 177 crore, a notable improvement from an EBITDA loss of Rs 48 crore in the same quarter of the previous fiscal year. The EBITDA margin for Q1FY25 stood at 4.21%, indicating improved profitability. Additionally, the gross order value (GOV) for Zomato’s B2C business grew by 53% year-on-year, reaching Rs 15,455 crore.
Axis Securities has initiated coverage on Zomato stock with a ‘buy’ rating and a target price of Rs 280, implying a 19% upside from the previous closing price of Rs 234 per share. The brokerage anticipates that Zomato will continue to strengthen its position in the food delivery market and capture more market share through ongoing technology adoption and innovation. This is expected to drive further user growth on the platform.
Zomato’s food delivery GOV grew robustly by 27% year-on-year, while Blinkit continued to perform strongly, with a GOV increase of 130% year-on-year, reaching Rs 4,920 crore. Management expects food delivery GOV growth to sustain at over 20% in the near term, though slightly below recent quarters’ growth rates.
Emkay Global highlighted that Blinkit’s impressive growth is complemented by continued improvements in profitability, maintaining adjusted EBITDA breakeven despite investments in new stores. The management’s expansion plan aims to grow Blinkit to 2,000 stores by 2026, capturing more market opportunities.
Additionally, Zomato has announced plans to develop a new app called District, which it envisions as its third-largest B2C business. This strategic move is expected to further enhance Zomato’s market presence.
Analysts at Emkay have revised their EPS estimates for FY25-27 downward by -2% to 4%, factoring in Q1 performance and Blinkit’s aggressive expansion plans. Despite these adjustments, Emkay Global has maintained its ‘buy’ rating on Zomato stock and increased the target price to Rs 270 per share.
Year-to-date, Zomato stock has surged 105%, more than doubling investors’ returns. In contrast, the benchmark Nifty 50 has risen by 14% during the same period. This performance highlights Zomato’s strong market position and growth potential.
Nomura has also raised its price target for Zomato stock from Rs 225 to Rs 280, citing the company’s impressive growth trajectory and improved profitability in both food delivery and quick commerce sectors. Citi has characterized Zomato’s results as a “stellar quarter,” increasing its price target from Rs 235 to Rs 280 while maintaining a “buy” rating. Jefferies has adjusted its target price from Rs 230 to Rs 275, acknowledging potential volatility from Blinkit’s expansion but also retaining a “buy” rating.
Bernstein has referred to Zomato as a “core internet holding,” updating its price target from Rs 230 to Rs 275, while maintaining an “outperform” recommendation. With robust endorsements from multiple brokerages and significant upward revisions in price targets, Zomato stock is poised for potential further growth, possibly surpassing the Rs 350 mark.
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