Morgan Stanley Thinks Zomato Looks Even Better After Zepto's Big Fundraise, Sees 21% Upside

Global brokerage Morgan Stanley has picked Zomato as one of its favourites in India’s internet space, noting quick commerce competitor Zepto’s recent $665 million (₹5,560 crore) pre-IPO fundraise as a show of faith in the quick-commerce vertical as a whole.

What Happened: Morgan Stanley reiterated its “overweight” call on Zomato, with a target price of ₹235 per share, implying a 21% upside compared to its previous close.

The brokerage noted that Zepto’s recent funding round has raised the profile of the quick commerce channel, where Zomato plays a significant role following its acquisition of BlinkIt in June 2022.

Boon And Bane: However, there is a strong likelihood of increased competition in the quick commerce space in the near term, it said. Morgan Stanley warned that if competition intensifies further, BlinkIt could struggle to remain profitable, potentially leading to selling pressure on Zomato’s stock.

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Nevertheless, the brokerage believes that any correction in Zomato’s stock would present a good buying opportunity for long-term investors.

Despite a sharp re-rating of internet stocks, foreign brokerage Morgan Stanley remains positive about this sector. The brokerage observed that both macroeconomic and microeconomic factors are currently favourable for India’s internet stocks.

Based on these criteria, Morgan Stanley sees Zomato and PB Fintech as outperforming other internet players.

What Happened: Shares of Zomato were up 1.25% at ₹196.38 in early trade on Monday. Over the past year, Zomato shares have surged 162%.

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