Zomato shares fell 5% to an intra-day low of Rs 251.55 after the brokerage house Jefferies downgraded the stock to a ‘Hold’ rating from ‘Buy’, with a target price of Rs 275. The target price indicates limited upside for the stock from current levels
Zomato: What’s Jefferies’ big worry?
Jefferies has slashed the quick-commerce company’s FY26-27 consolidated EBITDA by 12% to 15% as it sees rising competition in this space impacting the company’s profitability going forward. Further, it expects that higher discounting may occur. For instance, Zepto Super Saver gives a 22% discount similarly the newly launched Flipkart Minutes is rolling out a 22% discount. Due to this discounting war, the brokerage sees a threat to the medium-term profitability of the company. However, in September 2024, Jefferies had a ‘buy’ rating on the stock and set a base case target of Rs 335.
Zomato: Morgan Stanley maintains Overweight
However, taking a different stance, Morgan Stanley maintained its Overweight rating on the stock, with a target price of Rs 355. It sees high revenue growth of 33% during FY25-27, despite elevated competition. The broker is betting on the proven track record of profitability and consistent share gain in the monthly active user metrics.
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“Within the Internet, we expect quick commerce to continue to leapfrog other channels (retail, E-com) with growth led by new categories & Tier 2 expansion with Zomato being the biggest beneficiary,” said another brokerage house Bernstein Research. Zomato is the top internet pick of the brokerage firm with an ‘Outperform’ rating and a Rs 335 target price.
Zomato Share price performance
If we check the Zomato stock’s performance. The share price is down over 24% so far in January. This is after the nearly 125% surge seen in the stock in 2024. If we trace the stock movement, it hit a 52-week low of Rs 121.70 last January and from those levels went on to hit a high of Rs 304.50 in December 2024. Zomato replaced JSW Steel on the Sensex on December 23.
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