Zomato’s share price took a hit today, falling 5% to Rs 253, following a downgrade by Jefferies. The global brokerage shifted its stance from “buy” to “hold,” citing rising competition in the quick commerce space.
Jefferies’ Revised Projections Raise Concerns
Jefferies’ decision to downgrade Zomato comes with revised projections for the company’s performance. The brokerage lowered Zomato’s price target to Rs 275 from Rs 335, signaling limited upside potential of just 1%. It also forecasted a significant decline in Zomato’s earnings:
- EBITDA projections reduced by 12% for FY26 and 15% for FY27.
- Net profit estimates slashed by 17% for FY26 and 18% for FY27.
- EPS projections dropped by 20% for FY26 and 21% for FY27.
Jefferies has also halved the valuation multiple for Zomato’s quick commerce arm, Blinkit, to 6X. This adjustment reflects profitability challenges as Blinkit navigates an intensely competitive segment.
Mixed Signals from Other Brokerages
While Jefferies struck a cautious tone, other global players presented contrasting views on Zomato’s potential.
- Morgan Stanley: Maintained its “Overweight” rating with a higher target price of Rs 355.
- Bernstein: Ranked Zomato among its top picks in the Indian stock market strategy.
These divergent outlooks highlight the ongoing debate over Zomato’s growth trajectory, particularly in the face of operational hurdles in quick commerce.
Impressive Q2 FY25 Performance Offers Optimism
Despite the downgrade, Zomato’s recent financial performance tells a different story. The Gurugram-based foodtech giant reported robust growth in Q2 FY25:
- Operating revenue surged by 68.5% quarter-on-quarter, reaching Rs 4,799 crore compared to Rs 2,848 crore in Q2 FY24.
- Net profit soared 4.8 times, hitting Rs 176 crore in the September-ending quarter.
These figures reflect strong core business performance, even as challenges loom in scaling adjacent verticals like Blinkit.
Competitive Landscape Intensifies
Zomato’s quick commerce business is under pressure from increasing competition. Players like Swiggy Instamart and Dunzo are vying for market share in a segment known for high cash burn and logistical complexities. Jefferies noted that FY25 could become a year of consolidation for Zomato as it addresses these challenges.
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