Zomato shares slide 7% as Q3 loss widens; analysts see 84% potential upside
Shares of Zomato fell over 7% in early trade on Friday, a day after the online food delivery company reported its December quarter earnings. Analysts have mixed views on the stock of the food aggregator with price targets as high as ₹100, an upside potential of 84% from Thursday's closing price.
Zomato shares opened 2.6% lower at ₹53 against the previous closing price of ₹54.4 on the BSE. Extending opening losses, the food tech stock declined as much as 7.4% to ₹50.35 in the first two hours of trade so far, with 73.36 lakh shares changing hands over the counter compared with the two-week average volume of 73.15 lakh stocks.
With a market capitalisation of ₹46,137 crore, the stock trades 33.5% higher than its 52-week low of ₹40.55 touched on July 27, 2022. The stock hits a 52-week high of ₹95.30 on February 10, 2022. In the last one year, the Gurugram-headquartered company has delivered a negative return of 43%, while it shed 4% in the past six months. The counter has dropped 1.5% in a month whereas it jumped 10.5% in a week.
The Deepinder Goyal-led company saw its net loss widening to ₹346.6 crore in the quarter ended December 31, 2022 (Q3FY23), against a loss of ₹63 crore in the year-ago period and ₹250.8 crore loss in the September quarter of the current fiscal. The revenue from operations, however, surged 75% to ₹1,948 crore in Q3FY23, compared with ₹1,112 crore in the corresponding period of last year. On a sequential basis, revenue rose 17% from ₹1,661 crore in Q2FY23.
Zomato’s adjusted revenue grew 66% YoY to ₹2,363 crore. However, the adjusted EBITDA loss widened to ₹265 crore from ₹192 crore in the September quarter of 2022. Adjusted EBITDA loss stood at ₹272 crore in the December quarter of the previous year (Q3FY22). Excluding Blinkit, the operating loss was ₹38 crore compared with ₹272 crore a year ago, the company said in an exchange filing.
Brokerages' view on Zomato Q3 results
Foreign brokerage house Goldman Sachs has maintained a ‘Buy’ rating on the stock with a target price of ₹100 per share. The analysts in a note said that Zomato’s food delivery GOV growth was weak, but was broadly in line with estimates. The adjusted revenue growth was driven by strong growth in Blinkit and Hyperpure segments, it said.
Jefferies has also affirmed ‘Buy’ rating with a price target at ₹100 per share, citing the company’s intent to reduce loss. The brokerage said the outlook looks positive as the break-even target stays and another positive in the context of Zomato gold.
Meanwhile, Morgan Stanley has kept an ‘overweight’ rating on the stock with a target at ₹82, saying that quick commerce is showing good traction.