Brokerage firm Bernstein on Tuesday, February 25, said it is positive on Zomato and has projected a 39.2% upside on the stock from its previous close price.
The brokerage has given Zomato an “outperform” rating and a price target of ₹310 per share, slightly higher than its recent peak of ₹304, thereby marking a 27% downside to Monday’s close price.
Bernstein said the competitive intensity of instant commerce has been a major point of debate given the ongoing land grab and marketing dollars in Zomato and its peers Swiggy and Zepto.
However, unlike the pre-IPO mode, the brokerage believes the focus is currently more balanced – growing fast while delivering profitability in the medium term.
Even though the next few quarters will see a more competitive landscape, it believes there is a rational limit to price competition given Swiggy’s low margin structure.
The brokerage said it expects Zomato to continue its accelerated commerce leadership.
Zomato is also in focus as it will be added to the Nifty 50 index in the upcoming half-yearly reshuffle, effective March 28, 2025.
Earlier this month, the company also announced its decision to rebrand as Eternal Ltd, reflecting its evolving vision as it expands beyond its food delivery route to include multiple businesses including Blinkit, District and Hyperpure.
The company’s net profit for the third quarter fell 57% to ₹59 crore compared to last year, while its bottom figure was ₹138 crore in the base quarter.
Its revenue grew 64% to ₹5,404 crore compared to last year.
Its EBITDA stood at ₹162 crore as against ₹51 crore last year, while its margins expanded to 3% from 1.6% last year.
Zomato’s overall gross order value (GOV) for the food delivery business grew 17% from last year but grew only 2% sequentially. The management attributed the sluggish growth in food delivery GOV to a broad-based lack of demand.
For Blinkit, which is Zomato’s quick commerce business, revenue grew 117% compared to last year and 21% compared to the September quarter.
However, on an EBITDA basis, Blinkit again slipped into a loss, reporting an EBITDA loss of ₹30 crore compared to a positive EBITDA of ₹48 crore in the same quarter last year.
Blinkit also reported a net loss of ₹103 crore.
The management attributed the loss in the quick commerce business to the push forward of growth investments in the business, which would have otherwise been done in a phased manner.
The company said Blinkit will reach the 2,000 store mark by December 2025, a year ahead of its initial guidance of December 2026. The business crossed the 1,000 store mark this quarter.
Out of the 30 analysts who have coverage on the stock, 25 have a ‘buy’ rating, one has a ‘hold’ rating and four have a ‘sell’ rating.
At 9.50 am on Tuesday, February 25, Zomato shares were trading 2.67% higher at ₹228.66. It has gained 39.3% in the last one year.
