Zomato reported strong Q4FY24 results, however shares of the company plummeted as much as 6% in early trade. That’s all there is to it.
To Put It Briefly
1.] Despite excellent Q4 performance, Zomato shares decline.
2.] Early trading saw a 6% decline in shares.
3.] Many brokerages enhance their target prices while maintaining an optimistic view.
Even after the firm revealed impressive Q4 numbers the day before, shares of the massive online meal delivery company Zomato plummeted on Tuesday.
After plunging as much as 6% in early trading, Zomato shares recovered to close 1.63% lower at Rs 190.55 at approximately 10:45 am.
In comparison to a deficit of Rs 188 crore during the same time last year, the company recorded a consolidated net profit of Rs 175 crore. Its operating income was Rs 3,562 crore as opposed to Rs 2,056 crore during the same time last year.
Furthermore, Blinkit, Zomato’s fast-commerce venture, reached operational EBITDA breakeven in March 2024.
Zomato’s stock dropped today despite the company’s strong success in the March quarter. According to market analysts, this can be the result of profit booking and continuous market volatility.
Higher employee stock ownership plan (ESOP) charges could have contributed to the reduction as well. It should be mentioned that the business is asking shareholders to approve a new ESOP scheme that will involve 18.2 crore shares, valued at more than Rs 3,500 crore.
Nonetheless, a number of brokerages have boosted their target prices and maintained their bullish outlook on Zomato stock.
The management of Emkay Global stated in a note that the company is enthusiastic on Blinkit and plans to keep adjusted EBITDA levels near break-even throughout the upcoming quarters.
It stated that by the end of the fiscal year 2025, Blinkit hopes to have 1,000 dark stores, up from 525 at the end of the March quarter of 2024.
The brokerage went on to say that because Blinkit is currently under-represented in these areas, it believes there are significant growth prospects in the top eight cities, where the majority of this expansion is anticipated to take place.
In the meantime, Nuvama Institutional Equities raised Zomato’s stock, pointing to the company’s ambitious goals for growth and expansion. According to the statement, the company’s choice to increase the number of dark stores represents a significant change in expectations and strategic positioning for Blinkit in the rapid commerce industry.
Although this will have an immediate negative effect on profitability, Nuvama stated that Blinkit will become the undisputed leader in fast commerce, valuing the company at $13 billion and Zomato’s food delivery at $10 billion.
The firm has kept its ‘buy’ recommendation in place and raised its target price for the company from Rs 180 to Rs 245.
Brokerage company CLSA has likewise kept its “buy” rating on Zomato stock in the interim. Citing Blinkit’s development and the company’s focus on growing the fast commerce segment, CLSA has raised its target price to Rs 248.
Citi, which has a ‘buy’ rating on Zomato, stated that the business is still on track to meet its first-quarter FY25 guidance and that it achieved adjusted EBITDA breakeven in rapid commerce for the March quarter.
In view of Zomato’s rapid expansion of its dark-store footprint in fast commerce, the brokerage has raised its target price to Rs 235 per share. It now expects continuous adjusted EBITDA breakeven in this sector until FY25.
Bernstein increased its goal for Blinkit to Rs 230 per share and commended its remarkable performance while keeping a “outperform” rating on Zomato.
It reaffirmed the company’s belief that Zomato’s fast-growing commerce division will soon cross the breakeven point and emphasized the company’s dedication to expansion, with a long-term adjusted EBITDA target of 4-5%.
Jefferies confirmed its ‘buy’ recommendation and noted Zomato’s outstanding year-over-year performance, but cautioned that investor expectations remain high.
With the rapid breakeven point in commerce for the March quarter and the expectation of rapid expansion due to the near-doubling of the number of stores in the upcoming year, the brokerage has increased its objective to Rs230.