Brokerage firm Macquarie has adopted a cautious outlook on Zomato, citing potential downside risks that could reduce the stock's value by around 50 percent. This has led to a 2.5 percent drop in the stock on November 13.
While Macquarie retained its 'underperform' call on Zomato, it raised its price target for the stock by 30 percent to Rs 130 to factor in on a lower discount rate assumption. Despite the price upgrade, the current target price still offers the scope for a potential downside of 50 percent for Zomato from the previous closing level.
At 10.09 am, shares of Zomato were trading at Rs 256.97 on the NSE.
The firm, while noting that “hyper-growth meets hyper-competition,” stated that it revisited the fundamental building blocks of growth and unit economics for Blinkit and Zomato Food Delivery.
The brokerage also stated that its current estimates for Zomato are pricing in its gross order value (GOV) for the food delivery and quick commerce business to grow at a compounded annual growth rate (CAGR) between 18 percent and 35 percent over 10 years. These estimates, according to Macquarie, are also currently pricing in fully optimized margins and benign competition.
During the July-September quarter, Zomato reported a net profit of Rs 176 crore, an improvement from the Rs 36 crore that was reported in the same period last year. Revenue for the quarter also grew 69 percent on-year to Rs 4,799 crore.
Meanwhile, Zomato's rival--Swiggy also made its market debut, listing at a premium of merely 8 percent over its IPO price of R 380. Macquarie initiated coverage on Swiggy, also assigning it an 'underperform' rating with a price target of Rs 325, much lower than its IPO price.
0 Comment