Zomato shares fell 5% to an intra-day low of Rs 251.55 after the brokerage house Jefferies downgraded the stock to a ‘Hold’ rating from ‘Buy’, with a target price of Rs 275. The target price indicates limited upside for the stock from current levels

Zomato: What’s Jefferies’ big worry?

Jefferies has slashed the quick-commerce company’s FY26-27 consolidated EBITDA by 12% to 15% as it sees rising competition in this space impacting the company’s profitability going forward. Further, it expects that higher discounting may occur. For instance, Zepto Super Saver gives a 22% discount similarly the newly launched Flipkart Minutes is rolling out a 22% discount. Due to this discounting war, the brokerage sees a threat to the medium-term profitability of the company. However, in September 2024, Jefferies had a ‘buy’ rating on the stock and set a base case target of Rs 335.

Zomato: Morgan Stanley maintains Overweight 

However, taking a different stance, Morgan Stanley maintained its Overweight rating on the stock, with a target price of Rs 355. It sees high revenue growth of 33% during FY25-27, despite elevated competition. The broker is betting on the proven track record of profitability and consistent share gain in the monthly active user metrics. 

“Within the Internet, we expect quick commerce to continue to leapfrog other channels (retail, E-com) with growth led by new categories & Tier 2 expansion with Zomato being the biggest beneficiary,” said another brokerage house Bernstein Research. Zomato is the top internet pick of the brokerage firm with an ‘Outperform’ rating and a Rs 335 target price.

Zomato Share price performance 

If we check the Zomato stock’s performance. The share price is down over 24% so far in January. This is after the nearly 125% surge seen in the stock in 2024. If we trace the stock movement, it hit a 52-week low of Rs 121.70 last January and from those levels went on to hit a high of Rs 304.50 in December 2024. Zomato replaced JSW Steel on the Sensex on December 23.

Zomato Vs Nifty 50

In fact the Zomato shares have fallen almost 10% in the last five trading days. The stock has wiped out 14.5% of investors’ wealth in the previous one month. However, it has given a return of 21.5% in the last six months.