Zomato Stock Price Drops by 6% | Is it Good to Buy or Hold?
Zomato Stock Price Decline Spurs Investor Interest
The latest quarterly financial report from Zomato, released for the fourth quarter of FY24, has stirred the market as its share price experienced a notable 6% downturn. Investors are now pondering whether this dip presents a favorable chance to capitalize on the stock’s potential.
Strong Financial Performance Despite Share Price Fluctuation
Zomato’s financials showcase a remarkable turnaround, with the company reporting a consolidated net profit of ₹175 crore, a significant improvement from the ₹188 crore loss recorded in the corresponding period last year. This growth trajectory demonstrates a 27% surge from the previous quarter’s ₹138 crore net profit, indicating robust financial health.
Key Financial Metrics Highlight Growth
Revenue Surge Drives Optimism
Zomato’s revenue from operations in Q4FY24 surged impressively by 73%, reaching ₹3,562 crore compared to ₹2,056 crore in the previous year. This substantial increase underscores the company’s ability to capture market share and drive top-line growth.
Gross Order Value (GOV) Expansion
The gross order value (GOV) for the March quarter exhibited substantial growth across business-to-consumer (B2C) segments, ascending by 51% year-over-year to ₹13,536 crore. This expansion reflects Zomato’s increasing traction and relevance in the food delivery market.
Operational Efficiency Improvements
At the operational level, Zomato achieved an EBITDA of ₹86 crore, marking a significant improvement from the ₹226 crore loss incurred during the same period in the previous year. This enhancement underscores the company’s commitment to operational efficiency and cost optimization.
A strong Bearish Engulfing Pattern was observed on the daily chart of zomato stock price one day prior to the results. Additionally, the stock is trading below its 21-day Moving Average, indicating a bearish trend in the upcoming week.
Analysts' Perspectives on Zomato Stock Price.
Emkay Global Financial Services
Emkay Global Financial Services views Zomato’s operational results positively, noting that while revenue exceeded estimates, margin discrepancies were primarily due to higher-than-expected ESOP costs. Despite this, the firm maintains a bullish outlook on Zomato, retaining a ‘Buy’ rating with a target share price of ₹230.
Nuvama Institutional Equities
Nuvama Institutional Equities anticipates short-term profitability challenges for Zomato’s quick commerce arm, Blinkit, as it plans to expand its dark store count aggressively. However, the firm remains optimistic about Blinkit’s long-term potential, valuing Zomato at $10 billion for food delivery and $13 billion for Blinkit. It maintains a ‘Buy’ rating with a revised zomato stock price of ₹245 per share.
Elara Capital
Elara Capital emphasizes Zomato’s strong position in the food business, projecting a robust adjusted EBITDA CAGR of 47% in FY24-26E. Despite acknowledging challenges such as higher ESOP charges and lower EBITDA for Blinkit, the firm maintains a ‘Buy’ rating, raising the target share price to ₹280 from ₹250.
Conclusion: Evaluating Investment Opportunities
While Zomato Stock Price may have experienced a temporary setback, its robust financial performance and positive outlook from analysts indicate underlying strength and growth potential. Investors seeking exposure to the dynamic food delivery and quick commerce sectors may find the current downturn in Zomato’s share price an opportune moment to consider adding this stock to their portfolios.
Disclaimer: The opinions expressed by analysts and brokerage firms are subjective and may not align with individual investment strategies.
