Zomato Share Price : Zomato’s 170% Stock Surge-Is It Still a Buy After Q1FY25 Results?

Zomato Share Price : Zomato’s 170% Stock Surge-Is It Still a Buy After Q1FY25 Results?

Zomato Share Price : Zomato, one of India’s leading food delivery platforms, has experienced a tremendous surge in its stock price over the past year, recording an impressive 170% gain. The company’s recent Q1FY25 results have further fueled investor interest. But with such significant growth already realized, many are left wondering if Zomato remains a good investment. Let’s delve into Zomato’s financial performance, market positioning, and future outlook to determine whether it’s still a buy.

Zomato’s Financial Performance in Q1FY25

Impressive Profit Growth

Zomato’s consolidated net profit for Q1FY25 skyrocketed to ₹253 crore, a massive jump from ₹2 crore in the same quarter of the previous year. This substantial growth was driven by increased gross order value across its key verticals: food delivery, quick commerce, and the going-out segment.

Revenue Surge

The company’s consolidated revenue for the quarter reached ₹4,442 crore, compared to ₹2,597 crore a year earlier. This significant revenue boost underscores Zomato’s strong market presence and its ability to attract and retain a growing customer base.

Market Reaction and Stock Performance

Stock Price Surge

Following the announcement of its Q1 results, Zomato’s stock surged by 11.5% in morning trade on August 2, reaching a new all-time high of ₹261. The stock opened 5% higher at ₹244 apiece on the BSE and closed 2% higher at ₹234.10 on August 1, reflecting strong investor confidence.

Positive Broker Ratings

Numerous brokerage firms have expressed bullish views on Zomato, raising their target prices after the Q1 performance. For instance, Nuvama Wealth increased its target price to ₹285 from ₹245, emphasizing Zomato’s robust growth and improved profitability.

Brokerage Perspectives on Zomato’s Future

Nuvama Wealth

Nuvama Wealth maintained a buy call on Zomato, highlighting the company’s ability to deliver strong growth and improve profitability consistently. They pointed to management’s guidance for 20%+ growth in food delivery and plans to significantly expand Blinkit’s dark store network.

Motilal Oswal Financial Services

Motilal Oswal also maintained a buy call with a target price of ₹300, indicating a potential 28% upside. They noted the stability of Zomato’s food delivery business and the promising opportunities presented by Blinkit in disrupting retail, grocery, and e-commerce sectors.

Morgan Stanley

Morgan Stanley retained its “overweight” rating on Zomato, raising the price target to ₹278 from ₹235. They believe Zomato’s aspirations for 20%+ growth in food delivery and the expansion of Blinkit’s stores demonstrate robust revenue growth momentum.

Nomura

Nomura increased its price target to ₹280 from ₹225, maintaining a “buy” recommendation. They noted Zomato’s significant growth potential and improving profitability in both the food delivery and quick commerce segments.

Growth Drivers for Zomato

Expansion of Blinkit

Blinkit, Zomato’s quick commerce vertical, is a critical growth driver. The company plans to increase Blinkit’s dark store count from 639 in Q1FY25 to 2,000 by the end of CY26, aiming to capture a larger share of the rapid delivery market.

New App for “Going Out” Segment

Zomato’s new app targeting the “going out” segment is expected to drive additional revenue growth. This app aims to enhance the dining out experience by providing seamless solutions for reservations and exploring dining options.

Strong Market Penetration

Zomato’s extensive customer base and deep market penetration continue to be significant assets. The company’s ability to attract and retain customers through innovative offerings and reliable service keeps it ahead of the competition.

Challenges and Risks

Maintaining Profitability

While Zomato’s revenue and order volumes are impressive, maintaining profitability amidst rapid expansion and intense competition is a challenge. The company needs to balance growth with sustainable profit margins.

Intense Competition

The food delivery and quick commerce sectors are highly competitive, with players like Swiggy, Amazon, and Dunzo vying for market share. Zomato must continue to innovate and provide superior service to stay ahead.

Regulatory and Operational Risks

Zomato operates in a dynamic regulatory environment that can impact its operations. Additionally, logistical and operational challenges in expanding Blinkit’s dark stores and ensuring timely deliveries could pose risks.

Future Outlook: Is Zomato Still a Buy?

Strong Growth Prospects

Despite the challenges, Zomato’s strong growth prospects make it an attractive investment. The company’s aggressive expansion plans, coupled with robust financial performance, indicate a promising future.

Positive Brokerage Ratings

The overwhelming majority of brokerage firms maintain a “buy” rating on Zomato, with many raising their price targets. This consensus reflects strong market confidence in Zomato’s growth potential and strategic direction.

Investor Sentiment

Investor sentiment remains positive, as evidenced by the stock’s impressive performance and the reaction to the Q1FY25 results. The stock’s ability to buck the trend in an otherwise weak market further underscores its attractiveness.

Conclusion

Zomato’s journey over the past year has been nothing short of extraordinary. The company’s strong financial performance, aggressive expansion plans, and positive market sentiment make it a compelling investment. While challenges remain, the overall outlook for Zomato is bullish, with significant growth potential in both the food delivery and quick commerce sectors. For investors seeking exposure to a dynamic and rapidly growing company, Zomato remains a buy.

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FAQs

1. What drove Zomato’s impressive Q1FY25 performance?

Zomato’s Q1FY25 performance was driven by higher gross order value across its food delivery, quick commerce, and going-out verticals, resulting in significant revenue and profit growth.

2. How has the market reacted to Zomato’s Q1FY25 results?

The market reacted positively, with Zomato’s stock surging 11.5% post-results and several brokerage firms raising their target prices, indicating strong investor confidence.

3. What are the key growth drivers for Zomato?

Key growth drivers for Zomato include the expansion of Blinkit’s dark store network, the launch of a new app for the “going out” segment, and a strong customer base with deep market penetration.

4. What challenges does Zomato face?

Zomato faces challenges such as maintaining profitability amidst rapid expansion, intense competition from other players, and navigating regulatory and operational risks.

5. Is Zomato stock still a buy after its recent surge?

Yes, despite the recent surge, Zomato’s strong growth prospects, positive brokerage ratings, and robust financial performance make it an attractive investment.