Zomato Rallies Further To Touch A New 52-Week High At INR 123.9 After Strong Q2 Show

Shares of Zomato touched a fresh 52-week high at INR 123.9 on the BSE on Monday (November 6) as they jumped as much as 6.4% during the intraday trading on the back of the company’s robust Q2 FY24 earnings and positive Street view on the stock.

The foodtech major reported its second consecutive profitable quarter on Friday as its Q2 PAT jumped to INR 36 Cr from INR 2 Cr reported in Q1 FY24. Zomato saw strong growth across business verticals, including quick commerce platform Blinkit, during the quarter under review.

Following the announcement of results, at least nine brokerages raised their price targets (PTs) on Zomato.

Raising its PT on the stock to INR 145 from INR 120 earlier, Bernstein said that Zomato flywheel is not only turning but also accelerating into a dominant platform across food delivery and commerce.

The brokerage increased its PT on the back of Zomato’s better-than-expected growth in the quarter, positive outlook, and an improvement in the market conditions that led to a higher uptick in monthly transacting users (MTUs). It also increased Zomato’s food delivery revenue estimate for FY24 and FY25 by 3% and 4%, respectively.

On the other hand, Kotak Institutional Equities increased its fair value for the stock to INR 130 from INR 125 earlier, which implies an upside of 5.4% to the stock’s last close of INR 123.3 on the BSE today.

The brokerage also upgraded its FY2024-26 revenue estimates by 10-11%, which it expects to be driven by all three segments of Zomato’s business. However, Kotak expects higher ESOP costs for FY25.

JM Financial said that following its Q2 results and strong gross order value (GOV) growth outlook for key businesses, Zomato’s shares will remain buoyant. 

“With food delivery EBITDA margin gradually moving towards steady state levels and Blinkit business turning contribution level profitable, we now use a lower WACC (Weighted Average Cost of Capital) assumption of 12% versus 13% earlier,” said the brokerage as it raised its PT on Zomato to INR 155 from INR 115 earlier.

It must be noted that Q2 FY24 was the first full contribution positive quarter for Blinkit. 

Highlighting that Zomato’s gold subscribers contributed about 40% to Zomato’s food delivery GOV compared to 33% and 19% in Q1 FY24 and Q4 FY23, JM Financial said this development augurs well for the business as subscriptions typically have a positive impact on customer stickiness and ordering frequencies. 

At a time when the entry of the government-backed ONDC in the food delivery space has raised some concerns about the impact on Zomato’s business, Motilal Oswal reiterated that it does not expect the competition to intensify further for the Deepinder Goyal-led company. 

It also reiterated its positive stance on the long-term growth opportunity for Zomato and increased PT to INR 135, which implies an upside of 9.5% to the stock’s last close.

Elara Capital increased its PT on Zomato to INR 150 from INR 140 earlier, implying an upside of over 21% to its last close.

“We believe Zomato’s clout in the food business (duopoly nature) and scalability prospects in Blinkit may drive share price performance,” the brokerage said.

Jefferies increased its PT on the stock to INR 165 from INR 130.

It is pertinent to note that shares of Zomato have gained 107.7% so far this year on the back of strong growth and the company turning profitable. Its market cap has also crossed the $12 Bn mark from $6 Bn at the end of last year.

Twenty three out of the 27 brokerages covering Zomato have a ‘buy’ or above rating on the stock, while four rate the stock as ‘sell’ or lower.

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