BackZomato shares rebound today after sharp selloff. A good opportunity to buy?
Zomato shares recovered from lows in Tuesday's early deals as the stock was trading over 6% higher at ₹97 on the BSE
PremiumShares of Zomato recovered from lows in Tuesday's early deals as the stock was trading over 6% higher at ₹97 apiece on the BSE. The stock had witnessed continuous fall in the past five sessions, declining about 29% during the period, as the new age stocks suffered amid the sell-off in tech stocks.
“Sharp decline in the stock price of Zomato seems to be tracking the decline in prices of global tech stocks. There is no change in our fundamental view on Zomato and we retain Buy rating with an unchanged FV of ₹170," said brokerage house Kotak Institutional Equities in a note.
Zomato’s stock price has corrected by 27.4% over the past two sessions, which as per analysts seems largely driven by a correction in global tech names like DoorDash, Delivery Hero and Deliveroo. Kotak said that there has been no company-specific development of note that may have impacted the stock price of Zomato.
“We retain Buy on the Zomato stock as we believe the food delivery business offers solid long-term growth potential. Cities with higher density of restaurants are witnessing much better contribution margins than nascent cities; their relative mix may impact near-term margins although we retain our expectation of Zomato turning EBITDA breakeven by FY2025 adjusted for ESOP expense," the brokerage added.
Further, Zomato bought around 9% stake in Grofers (now Blinkit) for US$100 mn. Kotak expects Zomato to up its stake in the company and/or make further investments within the next 6-12 months as it moves towards making its mark in the hyperlocal grocery delivery space.
It also has minority stakes in Magicpin and Shiprocket, however, the brokerage believes that value accretion from these smaller investments may take time to realize. “With around $1.9 billion of cash as of September 2021, Zomato remains well capitalized to fund its losses and carry out fresh investments in Grofers," it added.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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