Analysts are bullish on food delivery platform Zomato even after a recent rally in the stock’s share price, seeing further upside potential as India leans more heavily on online services.

What Happened: International brokerage HSBC has reaffirmed its bullish stance on Zomato, citing expectations of a surge in digital expenditures within India.

The financial institution has upped its target price for Zomato from ₹163 to ₹200, indicating a potential upside of 29% from its closing price on Monday.

HSBC predicts that advertising revenues will continue to serve as the bedrock of Zomato’s long-term growth strategy, particularly bolstered by Blinkit, the company’s grocery arm. Blinkit’s advertising revenues are anticipated to constitute approximately 3% of India’s total digital ad spend within the next five years, according to HSBC.

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More Support: Motilal Oswal, another financial institution, projects robust growth for Zomato, expecting a 70% year-on-year increase in FY24 and a 41% surge in FY25. This growth trajectory is anticipated to be primarily driven by Blinkit’s expansion into new geographies, enhanced order frequency, and a more balanced competitive landscape within the quick commerce industry.

Despite fluctuations in the broader market, Zomato shares have experienced significant gains, climbing nearly 58% in the past six months and nearly 200% over the last year, outperforming the Nifty index by a substantial margin.

In recent developments, foreign investor Antfin Singapore Holding divested 17.64 crore shares, equivalent to a 2.02% stake in Zomato, on March 6, at an average price of ₹160.26 per share. This transaction amounted to ₹2,827.08 crore. The investor previously held a 6.32% stake in Zomato until December 2023.

Price Action: Zomato shares inched up 0.16% to ₹155.10 around noon on Tuesday and traded in a tight range amid a choppy market session.

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