Zomato’s stock has recently faced significant fluctuations, particularly on October 22, 2024, when the company announced a meeting to discuss fundraising through a Qualified Institutional Placement (QIP). This news has stirred investor interest and concerns alike, impacting share prices. As of now, Zomato shares are experiencing a notable decline, with a drop of approximately 6.8% over the past five days and 14.5% over the last month.
Reasons for Zomato Share Price Decline
Several factors have contributed to the downturn in Zomato’s stock price:
- Intensified Competition: The entry of Reliance Industries into the quick commerce sector poses a direct threat to Zomato’s Blinkit, which has been expanding aggressively. Reliance’s JioMart aims to launch grocery deliveries across multiple cities, targeting delivery times as short as 30 minutes. This competitive pressure has led investors to reassess Zomato’s market position and profitability potential.
- Profit Booking: Following Zomato’s strong Q4 results, which included a consolidated net profit of Rs 175 crore, some investors opted to book profits, leading to an initial drop in share prices despite the positive earnings report.
- Employee Stock Ownership Plan (ESOP) Costs: The company’s decision to implement a new ESOP plan worth over Rs 3,500 crore has raised concerns about increased costs impacting profitability in the near term.
- Aggressive Expansion Plans: Zomato plans to add 500 new dark stores for Blinkit by FY25. While this strategy aims for long-term growth, analysts have expressed skepticism about its impact on immediate profitability.
Current Zomato Shares Performance
As of October 23, 2024, Zomato shares have seen significant volatility:
- Current Share Price: Approximately Rs 190.55 after falling by 6% in early trading sessions.
- 52-Week Range: The stock reached a high of Rs 207.3 on May 13, 2024, and a low of Rs 69.5 on June 5, 2023.
- Year-to-Date Performance: Up by 34.7% in 2024 and an impressive 135.3% over the past year.
Zomato Shares Analyst Outlook and Target Prices
Despite recent declines, several brokerages maintain a bullish outlook on Zomato:
- CLSA has raised its target price to Rs 248, citing Blinkit’s growth potential.
- Citi has set a target price of Rs 235, emphasizing the company’s swift expansion strategy.
- UBS maintains a ‘Buy’ rating with a target price of Rs 250, while Nomura India has increased its target from Rs 180 to Rs 225 due to long-term growth prospects in both food delivery and quick commerce sectors.
Summary of Target Prices from Brokerages
| Brokerage | Target Price (Rs) | Rating |
|---|---|---|
| CLSA | 248 | Buy |
| Citi | 235 | Buy |
| UBS | 250 | Buy |
| Nomura India | 225 | Outperform |
| ICICI Securities | 300 | Buy |
Zomato Shares Future Prospects
Zomato is focusing on expanding its quick commerce arm with Blinkit aiming for operational profitability. The company is also exploring partnerships to diversify its product offerings beyond groceries. Recent collaborations with brands like Lenskart suggest an intention to enhance delivery options within quick timeframes
Zomato Shares Market Sentiment
The current market sentiment towards Zomato is mixed due to competition and internal challenges like rising costs associated with ESOPs. Analysts predict that while short-term pressures may weigh on the stock price, Zomato’s long-term growth strategies could yield positive results if executed effectively.
