Zomato Share Price Soars Over 6%, Reaches 52-Week High for the Second Consecutive Quarter

Zomato Share Price

Zomato’s Stock Soars to a 52-Week High

On November 6, 2023, Zomato, the popular food delivery platform, experienced a remarkable surge in its stock price. Shares of the company rose by approximately 6.5 percent, reaching a 52-week high.

This impressive performance was driven by the fact that Zomato had achieved profitability for the second consecutive quarter in the period from July to September 2023.

This was a significant milestone for the company, and it generated a wave of positivity in the market.

Impressive Financial Results

The key driver behind this surge in Zomato’s stock price was the company’s impressive financial performance. In the September 2023 quarter, Zomato reported a net profit of Rs 36 crore, which was a stark contrast to the net loss of Rs 302 crore in the same period the previous year.

Additionally, the company’s revenue showed substantial growth, increasing by 71 percent year-on-year to reach Rs 2,848 crore, up from Rs 1,661 crore in the year-ago period.

The positive reaction to Zomato’s financial results wasn’t limited to the stock market. Several prominent brokerages revised their target prices for Zomato’s shares, indicating a high level of confidence in the company’s future prospects. These upward revisions in target prices, in turn, fueled increased buying interest in the stock.

Brokerages’ Reactions

1. Nuvama Institutional Equities reacted enthusiastically to Zomato’s results by increasing its target price for Zomato stock by over 27 percent, setting it at Rs 140. The brokerage emphasized that Zomato’s revenue growth exceeded expectations and maintained a “buy” recommendation, expressing confidence in Zomato’s potential to maintain its leadership in the food delivery sector and capture more of the instant commerce market.
2. HSBC also raised its target price for Zomato shares to Rs 140 while continuing to recommend a “buy” rating for the stock. The brokerage expressed optimism regarding Zomato’s guidance for the next quarter and its long-term prospects.
3. Jefferies provided a “buy” rating for Zomato shares with a target price of Rs 165, underlining its belief in the company’s potential for future growth.
4. Motilal Oswal Financial Services offered a bullish outlook, suggesting that with its dominant market share and strong growth in the food delivery and hyperpure businesses, Zomato is poised to achieve a robust Compound Annual Growth Rate (CAGR) of 53 percent over the financial years 2023-2025. They issued a “buy” rating with a target price of Rs 135.
5. Morgan Stanley commended Zomato’s solid performance in the September quarter, viewing it as a testament to the effectiveness of the company’s strategic execution. They assigned an “overweight” recommendation on the stock with a target price of Rs 125.

Market Reaction and Share Price Movement

On the morning of November 6, the trading session for Zomato shares commenced on a positive note, with the stock opening at Rs 119.60 on both the BSE and NSE stock exchanges.

Subsequently, the stock exhibited strong momentum, climbing by about 6.5 percent from the previous closing price, and eventually hitting a 52-week high of Rs 123.90 on the BSE.

A similar milestone was achieved on the NSE, where the stock also touched a 52-week high at Rs 123.90. By the end of the trading session, Zomato’s stock closed at Rs 123, marking a gain of approximately 6 percent.

The positive sentiment around Zomato shares was already evident on November 3 when the company released its Q2 results. On that day, Zomato shares had closed 8.3 percent higher on the NSE, foreshadowing the strong rally that would occur on November 6.

Brokerages’ Target Price Revisions and Insights

Each brokerage that revised its target price for Zomato shares provided valuable insights into the factors influencing their assessments. Nuvama Institutional Equities, for instance, highlighted that Zomato’s revenue growth had exceeded their expectations, which was a significant driver behind their decision to increase the target price. This was indicative of strong consumer demand and a resilient business model.

HSBC’s positive outlook was not only based on the strong financial results but also on Zomato’s guidance for the next quarter. The company’s leadership’s confidence in future performance played a crucial role in the decision to raise the target price.

Jefferies, with a target price of Rs 165, expressed their confidence in Zomato’s ability to continue its growth trajectory, suggesting that the company’s value could significantly outpace the current stock price.

Motilal Oswal Financial Services, with its CAGR projection of 53 percent over FY 2023-2025, emphasized Zomato’s dominance in the market and the potential for robust future performance.

This projection reflects the brokerage’s positive outlook on the food delivery and hyperpure business segments.

Morgan Stanley’s “overweight” call on Zomato was rooted in the company’s stellar performance and strategic execution. Zomato’s ability to capitalize on market opportunities and deliver results contributed to their positive assessment.

Long-Term Prospects and Market Dominance

The brokerages’ assessments and target price revisions for Zomato shares underscore the long-term prospects of the company and its growing dominance in the market.

Zomato’s consistent profitability and strong revenue growth indicate that the company is well-positioned to capture a significant share of the food delivery and instant commerce market.

Motilal Oswal Financial Services’ projection of a 53 percent CAGR over the next few years suggests that Zomato has the potential to maintain robust growth.

This projection is supported by the company’s dominant market share, as well as its successful expansion into other areas like hyperpure.

Zomato’s impressive performance in the September quarter, along with its strategic execution, has garnered praise and high expectations from the market.

With favorable outlooks from prominent brokerages, the company’s stock has gained momentum and is likely to continue to attract investor interest.

Final Remarks

Zomato’s recent stock rally, driven by consecutive profitable quarters and impressive financial results, is a testament to the company’s resilience and potential in the competitive food delivery market.

The positive reactions from various brokerages, which have revised their target prices and maintained “buy” recommendations, reflect confidence in Zomato’s ability to maintain its leadership in the industry and expand its market share in instant commerce.

While the current stock performance is a result of strong financials, Zomato’s long-term prospects, market dominance, and strategic execution are equally important factors contributing to the positive sentiment.

As Zomato continues to capitalize on market opportunities and deliver results, it remains a prominent player in the evolving food delivery and instant commerce landscape.

The recent stock rally is not just a momentary spike but an indicator of the company’s potential for sustained growth in the future.