Zomato crashes 8% as analysts downgrade stock following Q3 results
What's the story
Market analysts are revising stock price targets downward for Zomato after the food delivery giant posted a mixed performance in the third quarter (Q3) of 2024.
While Zomato posted modest growth in its core business, it exceeded margin expectations.
However, its quick commerce venture Blinkit posted strong growth but also losses due to rising competition and investment costs.
At the time of writing, Zomato was trading at ₹221.60, down 8%.
Target revision
Jefferies downgrades Zomato's price target amid Blinkit's losses
Global brokerage firm Jefferies maintained a 'Hold' rating on Zomato but lowered its price target from ₹275 to ₹255 per share.
The firm noted that while Blinkit reported strong growth, it also slipped into losses due to investments and heightened competition.
Despite these challenges, Zomato plans to double Blinkit's store count to 2,000 by December 2025, potentially extending the period of loss-making for this venture.
Market outlook
Macquarie maintains 'Underperform' rating on Zomato
Macquarie maintained an 'Underperform' on Zomato with a price target of ₹130/share. The firm noted competitive intensity is hurting profitability and expects Blinkit's margins to stay negative for a long time.
However, Nomura retained a 'Buy' with a price target of ₹290/share, confident of Zomato's position as a top player in the quick commerce space despite intensifying competition.
Future projections
Bernstein and Nuvama's outlook on Zomato's performance
Bernstein, which has an 'Outperform' rating and ₹310 price target on the stock, observed Zomato's focus on quick commerce growth.
The firm also emphasized a trade-off between growth and margins due to this strategy.
Nuvama lowered its price target from ₹325 to ₹300 but retained a 'Buy' rating.
It cautioned that upfront costs for dark store additions could affect short-term profitability but anticipates stronger earnings as these stores mature.