Shares of the food delivery giant Zomato have surged more than 61% this year, buoyed by robust performance and positive sentiment from various brokerages.
In early trading, Zomato's shares saw a gain of over 2%, as numerous brokerages reiterated their optimistic outlook following the release of Prosus' FY24 annual report. This report underscored Zomato's faster growth compared to its competitor Swiggy.
The stock has been in the spotlight since global brokerages turned bullish after Zomato confirmed it was in preliminary talks to acquire Paytm's ticketing business.
According to the Prosus FY24 report, Swiggy's gross order value (GOV) saw a year-on-year increase of 26%, whereas Zomato's GOV grew by an impressive 36% during the same period. Additionally, Swiggy's revenue growth of 24% year-on-year lagged behind Zomato's adjusted revenue growth of 55.9% year-on-year. Furthermore, Swiggy reported trading losses amounting to $158 million for FY24, while Zomato achieved a positive EBITDA of $5 million.
Analysts at Emkay Global attributed Zomato’s higher growth rate to the superior performance of its Quick Commerce segment. They noted that while Swiggy's revenue increased by 24% year-on-year, Zomato's adjusted revenue nearly doubled, growing by almost 56% year-on-year.
Several brokerages have issued buy recommendations for Zomato. CLSA has set a target price of Rs 248 per share, and UBS has recommended a target price of Rs 250. Emkay Global has maintained its buy rating with a target price of Rs 230, highlighting Zomato's operational improvements and Swiggy’s planned IPO as factors likely to sustain investor interest. Morgan Stanley has also retained its ‘overweight’ rating on Zomato, with a target price of Rs 235. Bernstein, too, has a 'Buy' rating on Zomato, with a target price of Rs 230 per share, citing Zomato's market leadership, pricing power, and reduced delivery costs as key drivers for expanding margins and improved returns.
At 1:45 pm, Zomato's shares were trading 0.96% higher at Rs 200.83 on the National Stock Exchange (NSE).
Overall, Zomato's shares have risen by 60% over the past year and an astounding 168% in a year, reflecting strong investor confidence and the company's continued market dominance.
