Zomato’s stock skyrockets 14% on reporting first ever profit; brokerages issue unanimous ‘buy’ call

Zomato’s stock skyrockets 14% on reporting first ever profit; brokerages issue unanimous ‘buy’ call

Zomato’s share price soared 13.7% to Rs 98.4 apiece today after the company reported a Rs 2 crore profit after tax for the first time ever, in its Q1 earnings report.The company reported strong revenues amounting to Rs 2,410 crore, which was up 17.5% quarter-on-quarter. Despite muted growth of Blinkit due to disruptions in April-May, the food delivery GOV jumped sharply by 11.4% sequentially owing to demand recovery, strong execution and seasonality. Zomato’s share price has surged over 26% in the last one month, and over 97% in the last six months. Nuvama, Motilal Oswal and Emkay have recommended a ‘Buy’ rating on the Zomato stock, after the delivery of a strong Q1 performance by the company, and a further expected growth.

“Zomato has delivered profitability earlier than promised. There is clarity on vastly improving revenue growth. This company in a duopoly business has a long runway for growth. For those investors who bought at low rates partial profit booking is fine. It makes sense to remain invested in this growth stock”, said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

“EBITDA also turned profitable for the first time, aided by strong revenue growth and cost levers, coupled with operating leverage. Zomato expects adjusted revenue to grow at over 40% for at least the next couple of years and remain profitable going forward. Considering the Q1 beat and strong outlook, we have increased FY24-26E revenue by 13-22%, with better margin trajectory. We retain BUY with TP of Rs 110 (earlier Rs 90).”

Nuvama

Buy | Target price: Rs 110

“Zomato even delivered on GOV and revenue growth this quarter. Food delivery GOV, after being flat over the last two quarters, jumped 11% QoQ. Management has guided for 40%-plus adj. revenue growth each in FY24 and FY25. Besides, the company is targeting EBITDA profitability in coming quarters. Moreover, Zomato is targeting to turn adjusted EBITDA-profitable in all three businesses during FY25. Maintain ‘BUY’ with a revised DCF-based TP of Rs 110 (earlier Rs 94).”

Motilal Oswal

Buy | Target price: Rs 110

“We remain positive on the long-term growth opportunity for Zomato and do not expect competition to intensify further despite the entry of ONDC in the space. Our DCF-based valuation of Rs 110 suggests a 27% upside from the current price. We reiterate our BUY rating on the stock.”