Introduction

Zomato, the popular food delivery and quick commerce platform, recently witnessed a 6% decline in its share price. Analysts from UBS, Nomura, and other firms have revised their stock price targets. Let’s delve into the details and understand what led to this market movement.

Key Points

1. Q4 Performance: Zomato reported a consolidated net profit of ₹175 crore in Q4 FY24, a significant improvement from the loss of ₹188 crore in the same period last year. Despite this positive performance, the stock faced downward pressure.
2. Guidance and Aggressiveness: The company’s guidance of adding 500 new stores in FY25 was deemed aggressive by some analysts. This expansion plan may impact near-term profitability, leading to investor concerns.
3. Analyst Views:
   • UBS: Maintains a ‘Buy’ rating with a price target of ₹250. While Q4 results were in line with estimates, higher employee costs affected EBITDA.
   • Nomura: Ups its target price to ₹225 from ₹180, emphasizing Zomato’s growth potential in food delivery and quick commerce.
   • ICICI Securities: Remains bullish on the stock, expecting further revenue growth and strategic moves in quick commerce.
4. Medium-Term Outlook: Despite rapid expansion, adjusted EBITDA margin is expected to hover around zero for the next few quarters, with a 4-5% medium-term target

Conclusion

Zomato’s journey continues to be eventful, with both challenges and opportunities. Investors should closely monitor developments and consider the long-term growth prospects.