Swiggy’s share price rose 2.65% to a high of Rs 342.20 on February 12 after the brokerage firm Citi initiated coverage on the stock, with a ‘Buy’ call. The brokerage firm set the target price at Rs 480, implying an upside of 32% from current levels. The share price of Swiggy has erased over 36% of investors’ wealth from year to date.
According to Citi, the company’s market share has been stable and has seen a slight positive trajectory. It sees Swiggy trading at a discount compared to Zomato as the former has a large gap in unit economics and cash burn rate compared to Zomato. This means that Swiggy is on a path to customer acquisition pace, average order value, and supply chain cost reductions. Justifying substantial discount compared to Zomato in quick commerce space.
Moving on to the food delivery segment, Citi believes that the food delivery market will likely increase at a compound annual growth rate of 15% for a decade. This will translate to a market of $26 billion in FY34. Citi expects the market share between the two rivals to remain the same in the long term.
Plus, Swiggy is the second biggest plaster in the food delivery space and third in the quick-commerce segment. Food delivery is an “extremely attractive” market and Swiggy is on its path to deliver a gross order value compounded annual growth rate of 33% over FY22-25. Also, Citi sees a lot of headroom for growth.
To walk the talk, Swiggy has taken steps to increase its market share by launching Bolt, aggressive dark store expansion, carving out Instamart as a standalone app, and launching Snacc.
However, it pointed out that Swiggy needs to do some catching up on its cost efficiency.
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A week back, the company reported a consolidated net loss of Rs 800 crore, compared to a loss of Rs 524 crore in Q3 FY24. Its revenue from operations rose 31% to Rs 3,993 crore in Q3 FY25, compared to Rs 3,049 crore in the correspondent period a year ago. The company’s total expenses surged to Rs 4,898.27 crore from Rs 3,700 crore in the same period last year on the back of aggressive expansion plans in quick commerce business.
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