Zomato’s share price soared 13.7% to Rs 98.4 apiece today after the company reported a Rs 2 crore profit after tax for the first time ever, in its Q1 earnings report.The company reported strong revenues amounting to Rs 2,410 crore, which was up 17.5% quarter-on-quarter. Despite muted growth of Blinkit due to disruptions in April-May, the food delivery GOV jumped sharply by 11.4% sequentially owing to demand recovery, strong execution and seasonality. Zomato’s share price has surged over 26% in the last one month, and over 97% in the last six months. Nuvama, Motilal Oswal and Emkay have recommended a ‘Buy’ rating on the Zomato stock, after the delivery of a strong Q1 performance by the company, and a further expected growth.
“Zomato has delivered profitability earlier than promised. There is clarity on vastly improving revenue growth. This company in a duopoly business has a long runway for growth. For those investors who bought at low rates partial profit booking is fine. It makes sense to remain invested in this growth stock”, said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Should you buy, sell or hold Zomato?
Emkay
Buy | Target price: Rs 110
“EBITDA also turned profitable for the first time, aided by strong revenue growth and cost levers, coupled with operating leverage. Zomato expects adjusted revenue to grow at over 40% for at least the next couple of years and remain profitable going forward. Considering the Q1 beat and strong outlook, we have increased FY24-26E revenue by 13-22%, with better margin trajectory. We retain BUY with TP of Rs 110 (earlier Rs 90).”
Nuvama
Buy | Target price: Rs 110
“Zomato even delivered on GOV and revenue growth this quarter. Food delivery GOV, after being flat over the last two quarters, jumped 11% QoQ. Management has guided for 40%-plus adj. revenue growth each in FY24 and FY25. Besides, the company is targeting EBITDA profitability in coming quarters. Moreover, Zomato is targeting to turn adjusted EBITDA-profitable in all three businesses during FY25. Maintain ‘BUY’ with a revised DCF-based TP of Rs 110 (earlier Rs 94).”
Motilal Oswal
Buy | Target price: Rs 110
“We remain positive on the long-term growth opportunity for Zomato and do not expect competition to intensify further despite the entry of ONDC in the space. Our DCF-based valuation of Rs 110 suggests a 27% upside from the current price. We reiterate our BUY rating on the stock.”