Zomato’s stock price climbed over 3 percent on Thursday, approaching its all-time high following UBS’s renewed ‘buy’ rating and a target price of Rs 320.
The food delivery giant’s shares have been on a tear, outpacing the broader market with an impressive year-to-date gain of over 123 percent compared to Nifty’s 14 percent return.
Industry Growth and Competition
UBS reported that the food delivery industry saw a month-on-month growth of approximately 2.5 percent in August 2024, after adjusting for the number of days. The brokerage firm estimates Zomato’s gross merchandise value (GMV) growth for Q2FY25 at around 7 percent quarter-on-quarter, noting that competition between Zomato and Swiggy remained intense during this period.
Bullish Analyst Sentiment
Zomato’s recent stock rally gained momentum after JP Morgan significantly raised its target price from Rs 208 to Rs 340. The global investment bank increased its forecasts for FY25-27 by 15-41 percent, citing Zomato’s role in driving rapid retail consumer transformation through its convenience and selection-focused quick commerce model.
JP Morgan noted, “Zomato was going deeper across all Metros having proven the model in NCR and that its scale should help it drive monetisation from channel margins and ad spending.”
CLSA, another major brokerage, also expressed optimism by raising its price target on Zomato to Rs 353 from Rs 350. The firm considers Zomato its top pick among Indian consumer stocks, attributing this to the company’s rapid growth and the increasing market share of its quick-commerce arm, Blinkit.
Impressive Long-Term Performance
Zomato’s stock has been a standout performer over the past year, delivering returns of around 179 percent and more than doubling investors’ capital. This performance significantly outpaced the Nifty index, which rose by 28 percent during the same period.
As Zomato continues to expand its presence in major metropolitan areas and leverage its scale for increased monetization, investors and analysts alike appear bullish on the company’s future prospects in India’s growing food delivery and quick-commerce markets.
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