Zomato Shares Gain As Analysts Remain Unfazed By Wider Losses - BloombergQuint

Shares of Zomato Ltd. gained as most analysts retained their ‘buy’ investment recommendations on the online food delivery platform, citing higher revenue in the second quarter and benefits from new investments.

The company’s revenue rose 21% sequentially in July-September, but net losses widened as it beefed up spending on food delivery business.

Zomato also plans to invest $1 billion (about Rs 7,400 crore) over the next two years, with a large chunk of it to be earmarked for quick-commerce. It also bought stakes in CureFit, Shiprocket and Magicpin in the quarter gone by.

Shares of Zomato rose 5.84% to Rs 144 apiece as of 10:30 a.m. on Thursday. Of the 17 analysts tracking the company, 13 maintained a 'buy' and four suggest a 'sell', according to Bloomberg data. The 12-month consensus price target implies an upside of 18.5%.

The stock's trading volume was 12.5 times the 30-day average volume for this time of the day.

Here’s what brokerages have to say about Zomato’s second-quarter results...

Morgan Stanley

• Maintains ‘equal-weight’ with a price target of Rs 140 apiece, implying a potential upside of 3.13%.

• Gross order value and adjusted revenue beat estimates.

• Strategic road map addresses capital allocation priorities and enhanced disclosures.

• Higher chance of a rapid pickup in online penetration with large players remaining dominant even with new competition.

Kotak Institutional Equities

• Maintains ‘buy’ with a price target of Rs 170 apiece, implying a potential upside of 25.2%.

• Stellar growth in food delivery business.

• Strategic focus remains on core business growth; M&A will drive entry into hyperlocal businesses.

• Higher near-term growth gets negated by higher losses.

• Restaurant take rate of 15.8% and delivery take rate of 7.3% remained healthy and in line with past performance.

• New investments can drive synergies between new and core businesses over time.

ICICI Securities

• Maintains ‘buy’ with a price target of Rs 136 apiece, implying a potential upside of 18%.

• Revenue growth was incredibly strong (+21% QoQ and 140% YoY) and way higher than expectations.

• Delivery fee (+25% QoQ) outgrew gross order volumes (+19% QoQ) by a margin, hinting at a meaningful increase in delivery charges.

• Aggressive investments in next 500 towns and branding should drive back-ended benefits.

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Zomato Shares Gain As Analysts Remain Unfazed By Wider Losses - BloombergQuint
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