Zomato rebounded on Wednesday after opening in the red as global brokerage Macquarie flagged downside risks for the company. This coincided with the market debut of its peer Swiggy which listed on the exchanges at ₹420.

What Happened: Macquarie had an “underperform” rating on the stock with a target price of ₹130. Despite this it still represents a downside of nearly 50%. The brokerage said that it revisited the core growth drivers and unit economics for Blinkit's quick commerce and Zomato's food delivery. 

Macquarie has lowered its earnings estimates while highlighting downside risks to the consensus outlook. The brokerage also noted that its current estimates for Zomato reflect an expected compounded annual growth rate (CAGR) of 18% to 35% in gross order value (GOV) for the food delivery and quick commerce businesses over the next 10 years.

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Morgan Stanley had an “overweight” call on the stock and raised its target price to ₹355 from ₹278.

The brokerage sees a potential for the stock to double in the next three to four years. Moreover, a growing market share of quick commerce, strong execution in both food delivery and quick commerce, a robust balance sheet and a large profit pool expected by 2030 is expected to support its overweight rating on the stock.

In October, the company’s net profit skyrocketed by nearly 400% to ₹176 crore for the July to September period. The company's revenue from operations stood at ₹4,799 crore in the quarter ended September, representing a 68.5% year-on-year jump.

Price Action: Zomato was trading flat at ₹261.60 on Wednesday. The stock fell over 2% during the early trading hours.

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