Will Zomato Continue To Ride the Bullish Wave
The stock has been reflecting Zomato's performance as it generate 27.48 per cent returns YTD
The e-commerce player Zomato has witnessed optimistic sentiments from investors after posting robust growth in recent quarters. Its stock has been riding a bullish wave in 2024, delivering more than a 27 per cent return year-to-date (YTD).
With its quick-commerce arm, Blinkit, Zomato posted a consolidated topline of Rs 3,288 crore in the December quarter compared to Rs 2,314 crore in the same quarter last fiscal year. The profit after tax (PAT) rose to Rs 124 crore from Rs 21 crore in the last quarter.
India’s e-grocery market was pegged at USD eight billion in gross merchandise value (GMV) in 2022, according to estimates by Redseer Strategy Consultants. Meanwhile, the quick commerce market in India is forecasted to generate revenue of USD 3,348 million in 2024. This market is expected to exhibit a compound annual growth rate (CAGR) of 27.42 per cent for 2024-28, according to Statista.
With such a growth trajectory, investors have favoured bullishness on the stock. The stock has been reflecting Zomato's performance as it generated 27.48 per cent returns YTD.
"The growth rate is driving momentum, surpassing expectations in the December quarter due to the cricket World Cup and festive season. The company has also revised the guideline for the next quarter to 50 per cent from 40 per cent. The consistency with which Zomato is progressing towards profitability, breaking even in Blinkit, achieving higher EBITDA margins and utilising multiple levers like platform fees has contributed to the company’s performance, said Karan Taurani, Senior Vice President at Elara Capital.
He added that Blinkit has a huge potential to drive its food business. Although the valuation is premium in the near-term basis, the business can generate 20 to 25 per cent compounding returns in the medium to long-term basis.
Zomato issued its initial public offering (IPO) in July 2021 to raise Rs 9,375 crore at the issue price of Rs 76. Initially, the stock journey on the bourses remained subdued, however, the stock gained momentum from January 2023 and delivered more than 100 per cent returns in the same year.
The stock closed at Rs 158.65 with 1.49 per cent loss on the National Stock Exchange (NSE) in the Wednesday trading session.
“Zomato is in a highly overbought zone, as the stock’s current relative strength index (RSI) is above 70 in a daily, weekly, and monthly time frame. However, we may observe a dip soon due to profit booking. Judging by the current momentum, investors may consider fresh buying between the Rs 120 to 140 range, setting an expected target of Rs 175 to 250. Additionally, I recommend holding the stock for 3 to 18 months while setting the stop loss at Rs 100,” said VLA Ambala, Co-founder, Stock Market Today.
