Zomato stock down 21% from 52-week high amid market pessimism: Should you buy, sell, or hold to build sizable positions? | Stock Market News
Zomato’s stock is currently trading 21% below its all-time highs on the back of growing investor concerns about 1) accelerated investments in Blinkit’s supply chain (dark store and warehouse network), and 2) rising competitive pressures in quick commerce. While these concerns have merit, we believe the impact on Blinkit’s adjusted EBITDA margin (as % of GOV) may not be meaningful, and the deviation from near-term guidance of break-even levels will be limited to ~100bps as % of GOV (and could be temporary as well).
Further, brokerages believe supply chain investments should help Blinkit better compete with emerging competition. “Zomato, in our opinion, is the most resilient company in the quick commerce space due to its: a) strong market leadership, b) demonstrated history of strong execution capabilities, and c) robust balance sheet. We, therefore, strongly suggest that long-term investors should use the recent market pessimism in the stock to build sizable positions,” said JM Financials.
Zomato is a clear market leader (in GOV/revenue terms) across all its operating business segments. It is also well ahead of the competition on the profitability front across business segments. Moreover, it is the only major hyperlocal delivery company in the country that, at a consolidated level, is currently generating free cash flows, without having compromised on topline growth.
This indicates the strong execution capabilities of the management, giving us the confidence that Zomato is the best placed company to fend off emerging competitive threats in quick commerce. We, therefore, prefer Zomato over Swiggy (BUY, INR 550) amongst the two listed hyperlocal delivery players, post recent correction in both stocks.
Reiterate ‘BUY’ with an unchanged TP of INR 300: We continue to assign a target multiple of 75x on Zomato’s Mar’27 EPS to derive an unchanged TP of INR 300. Zomato continues to be one of our preferred picks in the listed Internet space. We maintain ‘BUY’.
