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Zomato Shares Surge 26% in 5 Days, Analysts See Further Gains; Should You Invest?


Shares of Zomato Ltd surged nearly 26 per cent in the last five sessions. The food delivery company’s stock hit a lifetime low of Rs 50.05 on NSE on May 12, 2022. However, after hitting its lows, Zomato shares have been surging northward continuously.  Zomato stock price has given sharp upside moves after the promising guidance of the company management after the Q4 results announcement. The scrip rose over 48 per cent in the last one month as brokerages upgraded its target price after its March quarter earnings.

Zomato’s consolidated net loss for the quarter ended March widened to Rs 360 crore compared to Rs 134.2 crore at the same time last year. Revenue from operations were at Rs 1,211.8 crore, up 75.01 per cent compared to Rs 692.4 crore in the same quarter last year.

As per experts, Zomato has announced that it has around Rs 12,200 crore unrestricted cash and their capital requirement are limited. Apart from this, during commentary, the company has promised to contain its operational cost and improve its margins in upcoming quarters. They said that this has turned the tide in favour of the stock and now it has started surging northward. However, they maintained that those who have this stock in their portfolio should continue to hold the stock whereas fresh investors should avoid taking any fresh position in the counter.

Zomato reported significant sequential improvement in all key operating and financial metrics in the fourth quarter of FY22. What was even more impressive were the disclosures and management’s willingness to address street concerns both through a shareholder’s letter as well as post-results conference call, analysts added.

“We remain bullish on Zomato’s long-term growth prospects in the hyper local delivery space as it is well positioned to benefit from robust industry tailwinds such as improving tech penetration and rising income share of digitally native millennials or GenZ. We also retain a positive view on the company’s other hyper-local ecosystem investments (i.e. beyond core food delivery) as they could lead to bundled offerings that would not only help it improve customer engagement, retention and ordering frequency but also drive operational synergies,” JM Financial report said.

Since the start of the year, the stock was under pressure and declined nearly 65 per cent as fall in global equity markets amid expected tightening by global central banks.

As per the Jefferies analysts, “Zomato is aiming for an accelerated growth, despite which, the focus is on loss reduction, aligning with the long term shareholder expectation. 1QFY23 loss should come down meaningfully.”

Broking house Morgan Stanley has kept the ‘overweight’ rating on the stock with a target at Rs 135 per share. Research firm UBS has maintained a ‘buy’ rating on the stock with a target price of Rs 130 per share.

The views and investment tips by experts in this report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.

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