Zomato: Zomato’s share price hit a record high of ₹278.45 on Friday, August 2, following the release of the company’s Q1FY25 results. The shares opened at ₹244 each on the BSE, marking a 5% increase.
Zomato’s Q1FY25 net profit increased to ₹253 crore from ₹2 crore in Q1FY24, owing to increasing gross order value in its meal delivery, rapid commerce, and going-out verticals, as reported by Mint.
The consolidated revenue for the quarter under review was ₹4,442 crore, up from ₹2,597 crore the previous year.
On Thursday, the shares closed at ₹234.10, up 2%.
Zomato’s share price increased by an astonishing 170 percent over the previous year, as of August 1. Despite the significant increases, most brokerage companies believe the stock is still a good buy due to the company’s outstanding growth and profitability prospects.
Brokerages are positive following a good first-quarter performance
Several brokerages expressed optimism about the stock and boosted their target prices after the company reported a better-than-expected first-quarter performance.
Nuvama Wealth, a brokerage firm, has maintained a buy call on the stock and boosted the target price to ₹285 from ₹245. According to Nuvama, Zomato continues to deliver on its promise of robust growth and better profitability.
“The corporation once again outperformed expectations across the board. “Management guided for 20%-plus growth in the short term in food delivery and set a target to increase Blinkit’s dark store count from 639 in Q1FY25 to 2,000 by the end of CY26,” Nuvama noted.
Motilal Oswal Financial Services has a buy call on the stock with a target price of ₹300, representing a 28% upside potential.
Motilal stated that Zomato’s meal delivery business is solid, whereas Blinkit provides a generational opportunity to engage in industry disruptions such as retail, grocery, and e-commerce.
Kotak Institutional Equities maintained a buy call on the company, revising the SoTP-based fair value to ₹270 from ₹225 before.
Kotak increased Zomato’s FY25-27 revenue expectations by almost 4-5% due to rising food delivery and Blinkit sales, while lowering EPS (earnings per share) estimates by 7-9% due to reduced Blinkit near-term profitability.
“We like the company’s excellent execution across verticals. “Stable food delivery growth and margins prompt a lower WACC (weighted average cost of capital) assumption of 12.5%,” Kotak stated.
While the company remains an intriguing long-term investment, several technical experts note that it has recently experienced significant gains, pushing it into the overbought zone. So, at this point, profit booking could be considered.
According to Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers, Zomato stock has surged significantly over the last two months, pushing it well above all major key moving averages, including the 21-day, 50-day, 100-day, and 200-day exponential moving averages (DEMA).
Patel emphasized that trading much above these levels suggests that the stock may be overextended and vulnerable to a correction. In such cases, there is an increased danger of a market correction because investors may start to take profits, causing selling pressure.
“We recommend against establishing new long positions in the stock at this elevated level. “For those who have already invested, it would be prudent to consider taking profits to lock in gains, as the current overbought condition suggests a possible drop in the stock price in the near term,” added Patel.
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