Zomato Shares Continue Slump After Q4: Why Brokerages Remain Bullish

Zomato‘s share price was tanking on Tuesday going down over 6% to hit an intraday low of ₹182.10.

What Happened: Zomato reported a net profit of ₹175 crore for the quarter ending March, marking a 27% increase from the previous quarter’s ₹138 crore. However, this figure fell short of analyst expectations pegged at ₹249 crore. In the same quarter last year, the food aggregator had posted a loss of ₹188.2 crore.

The company’s revenue for the quarter stood at ₹3,562 crore, showing an 8.3% increase from the December quarter’s ₹3,288 crore. The company also said it would abandon its plans to venture into the payments space, citing commercial viability concerns.

Analyst Reactions: Most brokerages remained positive on the stock. UBS maintained its “buy” rating for the stock with a price target of ₹250. The analyst pointed out that despite the company’s plans to rapidly expand its quick commerce business, the food delivery major expects to have EBITDA margin hover around zero for the next few quarters.

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Bernstein also maintained its “outperform” rating for the stock raising the price target to ₹230 from ₹200. The brokerage said that the performance of the food delivery business was in line with its estimates while the quick commerce business delivered a positive surprise.

Jefferies also maintained its “buy” rating for the stock hiking the price target to ₹230 from ₹200. The research firm said that the company’s management is top-notch and it is one of the reasons behind their positive outlook.

CLSA also maintained its “buy” rating for the stock with a price target of ₹248. The global brokerage firm said that the food delivery business remains steady. The analyst also highlighted the company’s strong guidance for Blinkit.

Kotak Securities also maintained its “buy” rating for the stock but cut the price target to ₹225 from ₹230. The brokerage firm said that the food delivery business’ 28% growth in gross order value beat its estimates by 2.5%.

Emkay also maintained its “buy” rating for the stock with a price target of ₹230. The analysts said that Zomato posted steady operational results, and revenue beat its estimates. The brokerage said that the miss on margins was on account of higher-than-expected ESOP costs for the Blinkit leadership team.

Price Action: Zomato's share price was down 5.48% to trade at ₹183.65 as the markets opened on Tuesday.

Read Next: Zomato Plans To Have 1,000 Blinkit Stores By FY25, Profit Growth To Take Back Seat

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