Zomato Shares Rally To Hit All-Time High On UBS Bull Call, Brokerage Sees 13% Upside On Stock

Zomato shares zoomed over 4% to hit a fresh all-time high of ₹284.30 on Thursday after UBS reaffirmed its bullish outlook on the stock.

What Happened: The increase in Zomato's stock price comes as global brokerage UBS maintained a “buy” rating on the stock and set a target price of ₹320, which represents a 13% upside from its current market value. UBS highlighted strong growth prospects as a key reason for their positive outlook.

The brokerage noted that month on month, Zomato’s order growth of 1.8% in August lagged behind Swiggy‘s 3.1%, a trend of monthly fluctuations seen since early 2024. However, when comparing Zomato's August volumes to December 2023, Zomato showed a 25% increase, while Swiggy's growth was just 18%.

UBS projects a 7% quarter-on-quarter rise in the company’s gross merchandise value for Q2FY25 and pointed out that industry volumes grew by 2.5% month-on-month in August 2024, after adjusting for the number of days.

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Zomato's shares have surged notably since JP Morgan raised its target price from ₹208 to ₹340, earlier this month. The food-delivery firm has ambitious expansion plans and is extending its model into all major metro cities after achieving success in the Delhi NCR region.

According to the research firm, the company’s scale will enable it to enhance monetisation through channel margins and advertising expenditures.

JP Morgan was among the host of brokerages that expressed optimism around the food-delivery giant.

CLSA said Zomato will be the largest listed beneficiary in the quick-commerce sector with its Blinkit vertical. Blinkit is anticipated to achieve positive EBITDA and net profit by FY25, marking a significant turnaround for the company.

Kotak, on the other hand, sees Zomato maintaining its competitive advantage in the quick-commerce industry in the face of rising competition.

Zomato’s shares have risen 127% in 2024 so far. In the past month alone, it has seen an upside of 7%.

Price Action: Shares of Zomato gained 4.12% to trade at ₹282.95 on Thursday afternoon.

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