JPMorgan boosts Zomato’s share price forecast: Key insights for investors

Global brokerage house JPMorgan has recently upgraded its valuation of Zomato by a substantial 63%, raising the target price to ₹340 for December 2025. This adjustment highlights Zomato's strong growth potential in the food delivery and quick commerce sectors, reflecting the significant progress the company has made over the past year.

A remarkable recovery

In the domain of share market investment, Zomato’s stock has demonstrated a remarkable recovery, increasing by 161% over the past year. This impressive performance has continued into 2024, with the stock rising over 110% year-to-date. Last month, Zomato’s shares peaked at ₹280, though they are currently trading 7% below this high. From a 52-week low of ₹96.47 in September last year, the stock has surged by an extraordinary 169.5%, showcasing strong investor confidence and interest in Zomato as a promising investment.

Dominant market position

Zomato has solidified its position as a leading player in India’s food-tech industry, controlling more than 50% of the market. This dominance is further supported by its extensive portfolio of services, including food delivery, grocery services, dine-out options, and the Hyperpure business. The recent acquisition of Paytm’s ticketing business adds another dimension to Zomato’s market strategy, enhancing its monetisation capabilities and broadening its service offerings.

In the context of share market investment, JPMorgan’s revised target price underscores the brokerage’s belief in Zomato’s potential to continue driving growth and capturing market share. The company’s food delivery segment is expected to benefit from a large total addressable market (TAM), which provides a solid foundation for continued success.

Key growth drivers

Several factors are contributing to JPMorgan’s optimistic outlook on Zomato, which is relevant for share market investment:

1. Food delivery expansion: Zomato’s food delivery business is projected to experience significant growth, with expectations for profit and margin expansion. The large TAM and increasing consumer demand support the company’s positive trajectory.
2. Blinkit’s profitability: Zomato’s quick commerce arm, Blinkit, has achieved profitability at both the contribution margin and EBITDA levels. This success positions Blinkit as a key driver of future growth. Its rapid scaling, particularly in metropolitan areas, is expected to outpace competitors and meet ambitious growth targets.
3. Ticketing business: The acquisition of Paytm’s ticketing business introduces a new revenue stream and enhances Zomato’s monetisation capabilities. Integrating ticketing with core dining services expands Zomato’s market reach and investment potential.

Revised forecasts

JPMorgan has updated its forecasts for Zomato’s performance from FY25-27, increasing expectations by 15% to 41%. The food delivery segment is now projected to grow at 20%, up from the previous forecast of 15%. This revised projection reflects strong growth metrics in both the food delivery business and Blinkit. Additionally, Zomato’s ability to scale its quick commerce operations and leverage its new ticketing business contributes to the optimistic forecast.

For those considering share market investment, these revised forecasts and growth drivers underscore Zomato’s potential to offer substantial returns. The company’s dominant market position and diverse business model provide a solid basis for continued investment interest.

Risks and challenges

Despite the positive outlook, several risks could impact Zomato’s valuation and its attractiveness for share market investment:

• Market competition: Zomato faces potential competition from rivals in the food delivery sector, which could affect its market share and profitability.
• Order values: A decrease in average order values (AOV) could negatively impact unit economics, potentially affecting overall profitability.
• Regulatory environment: Changes in regulations, particularly those affecting rider compensation and business models, could pose challenges for Zomato’s operations.
• Macroeconomic factors: Rising interest rates and increased market risk perceptions regarding companies with back-ended profits could influence Zomato’s valuation.

Future prospects

JPMorgan’s revised valuation reflects growing confidence in Zomato’s leadership and its ability to capitalise on opportunities in India’s food-tech market. The company’s expansion into quick commerce and focus on scaling its “Going Out” business are expected to drive sustained value for shareholders.

For those interested in share market investment, Zomato’s dominant position, diversified business model, and strong growth prospects make it an attractive option. The company’s adaptability and innovation will be crucial in navigating the evolving landscape of the food delivery and quick commerce sectors.

Overall, JPMorgan’s updated target price of ₹340 highlights Zomato’s impressive recovery and growth potential, reflecting the brokerage’s optimism about the company’s future performance and its role in shaping the future of India’s food-tech industry.