Zomato shares continue their remarkable rise, reaching a 123% year-to-date (YTD) increase in 2024. Despite the competition from Swiggy, Zomato’s stock hit an all-time high today, September 12, continuing its upward trajectory for six straight sessions. This growth outpaces Nifty’s 15% rise over the same period, making Zomato a prominent player in share market investment.
UBS sets bullish target for Zomato
UBS, a global investment firm, has placed a “buy” rating on Zomato, setting a target price of ₹320. This implies a potential 17.5% upside from the stock’s closing price of ₹282.50 on September 11. The investment bank’s bullish stance is based on Zomato’s strong revenue growth and its dominance in the food delivery and quick-commerce sectors. For investors looking to diversify their share market investment, Zomato’s upward momentum presents a promising opportunity.
In the second quarter of FY25, Zomato’s Gross Merchandise Value (GMV) growth is expected to rise by 7% quarter-on-quarter, according to UBS estimates. This growth follows a strong performance in Q1FY25, where Zomato reported a net profit of ₹253 crore, a significant jump from the ₹2 crore reported during the same period last year. Revenue also surged by 74% year-on-year to ₹4,206 crore. These robust financial results contribute to Zomato’s positive outlook for share market investment.
Order growth trends and competitor analysis
While Zomato has demonstrated impressive growth, UBS highlighted that its month-on-month order growth in August 2024 trailed behind Swiggy’s. Zomato’s order growth was 1.8%, compared to Swiggy’s 3.1%. However, when comparing August 2024 to December 2023, Zomato’s volumes saw a 25% increase, outperforming Swiggy’s 18% growth during the same period.
This highlights a competitive dynamic between the two food delivery giants, making share market investment in Zomato an interesting proposition for those analyzing the sector. Despite trailing Swiggy in certain months, Zomato’s overall long-term growth trajectory remains solid, particularly as the company continues to expand its offerings and market share.
Quick-commerce and future prospects
A report by Elara Securities India suggests that quick commerce, led by Zomato’s Blinkit, could drive significant growth in non-metro areas in the medium to long term. However, the firm cautioned that any regulation to cap discounts may negatively impact growth rates. Nonetheless, Elara sees potential for 70-80% growth in the quick-commerce segment, bolstering Zomato’s attractiveness for share market investment.
Zomato’s strong financial performance, coupled with bullish analyst ratings, positions the company as a compelling investment opportunity in the current market. With a growing presence in quick-commerce and food delivery, Zomato continues to capture investor attention and remain a key player in the share market investment landscape.
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