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Business News/ Markets / Stock Markets/  Zomato Stock Check: Up over 200% in last 1 year, positive for 11 straight months; should you buy?
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Zomato Stock Check: Up over 200% in last 1 year, positive for 11 straight months; should you buy?

Zomato turned PAT positive in Q1FY24, ahead of schedule and the first one to do so. Also, as the firm continued its growth in profitability in Q3FY24, the stock regained attention. But the question remains: Is it still a good ‘buy’?

Zomato turned PAT positive in Q1FY24, ahead of schedule and the first one to do so.Premium
Zomato turned PAT positive in Q1FY24, ahead of schedule and the first one to do so.

Zomato, along with many new-age stocks, garnered significant investor interest during its stock market debut in 2021. However, the initial excitement has dwindled, with many of these stocks currently trading below their IPO prices. Nonetheless, Zomato turned PAT positive in Q1FY24, ahead of schedule and the first one to do so. Also, as the firm continued its growth in profitability in the December quarter (Q3FY24), the stock regained attention. 

But the question remains: Is it still a good ‘buy’? Let's see what technical and fundamental experts have to say.

Stock Price Trend

Zomato share price has surged over 200 percent in the last one year and over 30 percent in 2024 YTD. In comparison, the benchmark Nifty has advanced 28 percent in the last 1 year and over 2 percent in 2024 YTD.

The stock has added 14 percent in February so far, extending gains for the 11th straight month since April 2023. Between April 2023 and February 2024, the stock has rallied over 216 percent. It was down 4.6 percent in March 2023.

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Currently trading at 161.25, the stock hit its 52-week high of 168.50 on February 26, 2024. It has now soared 229 percent from its 52-week low of 49, hit on March 28, 2023.

Meanwhile, it has skyrocketed 113 percent from its IPO price of 76.

Earnings

In the December quarter (Q3FY24), Zomato reported a consolidated net profit of 138 crore, compared to a net loss of 347 crore in the year-ago period. Sequentially, its net profit swelled 283 percent. Its revenue from operations in the third quarter of the current fiscal rose 69 percent to 3,288 crore as against 1,948 crore in the year-ago period.

The food delivery gross order value (GOV) - the total value of all orders placed - grew 25 percent year-on-year (YoY) and the company expects GOV to continue growing at 20 percent-plus YoY, and perhaps accelerate further if it sees more than expected market share gains and revival in macro consumer demand.

READ HERE: 11 power stocks gained between 20% and 110% in 3 months; check full list

Technical View

Om Mehra, Technical Analyst, SAMCO Securities

Source: SAMCO
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Source: SAMCO

The stock is currently forming higher highs and higher lows indicating a sustained uptrend. It is trading above its key moving averages. It’s placed well above its short-term (20 Day) and medium-term (50 Day) moving averages suggesting bulls are in total control. Projections suggest a potential climb to 175 levels in the coming months if it sustains above the support level of 150. Any potential dip to the level of 150-155 can be used as a buying opportunity. Volume profiles also indicate a strong support base in this zone.

Rohan Shah - Technical Analyst, Religare Broking Ltd

Zomato has been gradually inching higher for the past more than five months, after registering a decisive breakout from the bullish price pattern with noticeable volumes. However, from the last few sessions, the stock is seen finding stiff resistance around its record high levels i.e. 170 mark. We believe that for Zomato to continue its upward momentum, it would be crucial for the stock to decisively surpass the record high levels, which if it does, will open the way for 185 and 200 levels. On the flip side, in case the stock fails to break the record high levels, the stock shall encounter profit taking, dragging prices lower towards 149-145 zones.

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Pravesh Gour, Senior Technical Analyst at Swastika Investmart

The stock is forming a pattern of higher highs and higher lows on a daily basis, which suggests a promising trend. Additionally, the counter is now trading near its all-time high of 169, which is likely to act as a resistance level. Currently, it is trading at 161. If the trend continues, the initial target will be 170. If it manages to sustain its price above 170, we can expect targets of 200 in the short-midterm. On the downside, the first support level is around 155. Further down, a crucial support level is at 149, where the 20-day moving average is positioned.

Sheersham Gupta, Director and Senior Technical Analyst at Rupeezy

For the past 10 months, Zomato has been taking support at its 20-EMA, and for the same period, its daily RSI has rarely fallen below 50. This depicts the extreme bullishness in the stock. Currently, the stock is consolidating near its all-time high level. The stock has closed in the green for eleven straight months and is overbought on weekly and monthly timeframes. This may lead to consolidation above 150. However, once the all-time high level is breached a quick move can be expected and the stock can march towards 200-220 levels.

READ HERE: Foreign investors looking for meaningful correction to invest –Kotak Equities

Fundamental View

Jefferies: The brokerage has maintained a buying advisory on Zomato and raised its target price from 190 to 205. The new target price implies an upside of over 28 percent.

Zomato turned PAT positive in QFY24, way earlier than guidance. Improving profitability across both food delivery and quick commerce should continue to drive sharp earnings growth. It believes growth here could have been better, but the result is understandable in the context of weakness across consumption categories. The brokerage raised adjusted EBITDA estimates by 4-10 percent. In its base case, Jefferies expects a 25 percent CAGR in delivery revenue over FY23-26E. It expects unit economics to steadily improve with scale as Zomato unlocks cost efficiencies and as customer willingness to pay for convenience increases.

CLSA: The brokerage also has a ‘buy’ call on Zomato and raised its target price from 181 to 227. The new target indicates a 42 percent upside.

CLSA said that even though the company is small, it is an increasingly indispensable part of the profit pool. CLSA believes that the recent Q3 results show the path to stable profitability. The brokerage firm expects a 45 percent upside in the stock price, even if the base case for food delivery does not play out.

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“Even in a slower growth scenario for food delivery, with no Zomato every day launch, we see FY26 EPS of 5.36, 9 percent lower than our base case but still 45 percent upside on our PE-based valuation. We move our blended valuation to DCF and an FY26-based PE to align with our consumer/QSR methodology as we believe food delivery and quick commerce are now on a stable profitability path," said CLSA.

Geojit Financial Services: Geojit also reiterated a ‘buy’ rating on the stock after the company's December quarter earnings, with a rolled-forward target price of 174, based on 7 times FY26E price/sales. The target implies a 9 percent upside.

"Despite muted consumer discretionary demand in Q3FY24, the food delivery business recorded solid growth. Despite muted consumer demand, the food delivery business recorded healthy growth. A strong growth momentum in the segments, a positive margin, and a leading market position are expected to support superior performance," said Geojit.

 

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

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Published: 28 Feb 2024, 01:49 PM IST
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