Zomato, the popular online food delivery platform, has been making headlines recently due to fluctuations in its stock price and significant developments in its business operations. As of October 24, 2024, the company is facing challenges and opportunities that are shaping investor sentiment and market expectations.
Recent Zomato Share Price Performance
Zomato’s share price has experienced notable volatility. Over the past week, the stock has dropped approximately 6.8%, reflecting a broader trend of profit booking among investors despite the company’s strong financial performance in recent quarters. In the last month alone, shares have declined by 14.5%. However, looking at the bigger picture, Zomato’s stock is still up 34.7% year-to-date and has surged 135.3% over the past year, highlighting a robust recovery from earlier lows.
On October 22, Zomato’s board met to discuss a Qualified Institutional Placement (QIP) aimed at raising up to $1 billion. This move is intended to bolster Zomato’s competitive position amid increasing competition in the food delivery and quick commerce sectors. Analysts believe that this fundraising could significantly enhance Zomato’s cash reserves and reduce risks associated with price competition.
Factors Affecting Zomato Share Price
Several factors have contributed to the recent decline in Zomato’s share price:
- Intensified Competition: The entry of Reliance Industries into the quick commerce market poses a significant threat to Zomato’s subsidiary, Blinkit. Reliance’s JioMart plans to offer rapid grocery deliveries across India, which could disrupt existing players like Blinkit and Swiggy.
- Profit Booking: Following strong quarterly results, some investors opted to book profits, leading to a temporary dip in stock prices. Despite reporting a consolidated net profit of Rs 175 crore for Q4 FY24—up from a loss of Rs 188 crore the previous year—market reactions were mixed.
- Employee Stock Ownership Plan (ESOP) Costs: Zomato has proposed an ESOP plan involving 18.2 crore shares, which may increase operational costs and impact profitability in the short term.
- Market Sentiment: The overall market volatility and economic conditions have also played a role in affecting investor confidence in Zomato’s stock.
Target Price Adjustments
Despite recent challenges, several brokerages remain optimistic about Zomato’s future:
- CLSA has raised its target price from Rs 353 to Rs 370, citing Blinkit’s growth potential in quick commerce as a key driver for this adjustment.
- Citi has increased its target price to Rs 235, emphasizing Zomato’s operational improvements and expected sustained profitability in its quick commerce segment.
- Bernstein has also raised its target price from Rs 275 to Rs 330, reflecting confidence in Zomato’s long-term strategy over immediate profitability concerns.
Blinkit’s Role in Growth
Zomato’s quick commerce arm, Blinkit, is central to its growth strategy. The company aims to expand its dark store network significantly—targeting up to 1,000 stores by the end of FY25, up from 525 stores as of March 2024. This expansion is crucial as Blinkit has recently achieved operational profitability for the first time.
The company is also diversifying its offerings through partnerships with brands like Lenskart and Mokobara, aiming to deliver products beyond groceries within minutes. This strategic move not only enhances Blinkit’s service portfolio but also positions Zomato favorably against competitors.
Zomato Share Price Market Outlook
The market outlook for Zomato remains cautiously optimistic. Analysts note that while immediate challenges exist due to competition and market dynamics, Zomato’s fundamentals are strong. The company’s focus on expanding its quick commerce capabilities and maintaining profitability will be critical as it navigates through these turbulent waters.
As of now, investors are closely monitoring how Zomato will leverage its upcoming QIP funds and respond to competitive pressures from new entrants like Reliance Industries. Meta Description: Explore the latest updates on Zomato shares, including stock performance, expected target prices, reasons for fluctuations, and insights into Blinkit’s growth potential.
Disclaimer: The information given in this article is from investment experts and brokerage companies, they do not represent Local Haryana. Before taking any investment related decision, you must consult a certified expert.
