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Zomato stock climbs nearly 8% after JP Morgan raises target price, forecasts 40% upside

Stocks
2 min Read Sep 5, 2024
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Zomato's stock price surged by 7.7% today, reaching ₹261.60 per share. This jump follows a notable upgrade from global brokerage firm JP Morgan, which has raised its target price for Zomato from ₹208 to ₹340. This new target opens a potential upside of 40% from the stock's previous closing price of ₹242, reflecting growing investor confidence in Zomato's business prospects.

Blinkit's expansion is driving optimism

JP Morgan's revised target price underscores the positive impact of Zomato's quick-commerce arm, Blinkit. Blinkit has been expanding its operations across major metro cities and has shown promising results since its initial success in the NCR region. The brokerage anticipates that this expansion will drive increased monetisation through better channel margins and advertising revenues. Enhanced store-level economics are also expected to improve Zomato's EBITDA outlook.

CLSA's bullish stance

CLSA has set a target price of ₹353 for Zomato, marking it as a top consumer pick in India. CLSA's optimism is driven by Blinkit's rapid market share gains and the expectation of profitability by FY25. The firm's analysis indicates that Blinkit could potentially become more profitable than Zomato's traditional food delivery segment, supported by its growing network of stores.

Profit estimates adjusted

Despite the positive outlook, CLSA has reduced its FY26 profit estimates by up to 12% due to Zomato's recent acquisition of Paytm's ticketing business. This acquisition adds a new revenue stream but also impacts short-term profit projections.

Broader brokerage upgrades

Several other global brokerage firms have also revised their target prices for Zomato. UBS, for instance, has increased its target from ₹260 to ₹320 per share. This revision is based on better-than-expected June quarter results and strong growth in the quick-commerce sector. UBS forecasts that Zomato will approach EBITDA breakeven and project a positive margin in FY25.

Key takeaways

  1. Target price upgraded: JP Morgan's new target price of ₹340 for Zomato indicates a 40% potential upside from the stock's last closing price.

  2. Blinkit's growth: The successful expansion of Blinkit is a key factor driving the positive outlook, expected to boost monetisation and improve store-level economics.

  3. CLSA's high rating: CLSA's target price of ₹353 reflects confidence in Blinkit's growth and anticipated profitability by FY25.

  4. Profit estimates adjustments: CLSA has lowered its FY26 profit estimates by up to 12% due to the acquisition of Paytm's ticketing business.

  5. Brokerage upgrades: Other firms, including UBS, have also raised their target prices, driven by strong performance in both quick-commerce and food delivery segments.

For investors interested in buying shares online, Zomato presents a compelling opportunity with its positive growth outlook and supportive analyst recommendations.