Zomato Resurgence Continues; Share Price Hits 52-Week High

Zomato shares have seen a notable recovery over the past few weeks, with the stock hitting a 52-week high of INR 84.50 during intraday trading on Thursday (July 13).

Shares are trading at a 6% higher price than Wednesday’s close of INR 77.50. The intraday rise in share price is also down to a 1.74X surge in share trading volume on Thursday.

For some perspective, Zomato’s share price has grown 10.4% over the past five days. Further, the stock is up 54% compared to the start of 2023.

The recent surge in share price has confirmed the confidence expressed by many brokerages over the past weeks. Zomato had hit an all-time low of INR 40.15 per share in June 2022, and the stock has been languishing in the INR 50-INR 60 region for most of the past year. 

One of the factors for the resurgence is that brokerages are bullish on Zomato capitalising on its market share in the next few quarters and eking out a profit. For instance, Kotak Institutional Equities suggested Zomato has a GMV market share of 55% against rival Swiggy’s 45%, reflecting strong execution and customer stickiness, despite discounts coming off the platform. Kotak has also kept its ‘Buy’ rating on Zomato with a price target of INR 95. 

Similarly, Citi noted that Zomato is ahead on the profitability curve compared to Swiggy. Citi has maintained a ‘Buy’ recommendation on Zomato with a price target of INR 84 apiece. 

JM Financial termed Zomato and Swiggy ‘indispensable’ to the restaurant industry earlier in June, referring to ONDC. It said that restaurants in India can attribute a third of their revenue to food delivery aggregators. “With no meaningful competition in sight, we believe both incumbent aggregators are becoming indispensable to the ecosystem,” the report said.

Recently, Christopher Wood, global head of equity strategy at the brokerage firm Jefferies, was said to be increasing his investment in Zomato by another percentage point. 

Despite being a two-horse race, food delivery players have struggled to capitalise in terms of unit economics in the past due to high reliance on discounts and delivery costs. In recent months though, Zomato and Swiggy have taken a number of measures to boost this, such as Swiggy’s fixed platform fee of INR 2 per order or the relaunch of the Zomato Gold loyalty programme. 

In May, Zomato rival Swiggy announced that its food delivery business had hit profitability (after accounting for most operational costs). 

Besides Zomato, even fintech giant Paytm has seen a rally in recent months. The company had a terrible 2022 in terms of performance on the bourses but bounced back in 2023. Currently, Paytm’s shares are trading at INR 857.91 apiece, close to its 52-week high of INR 915.