Zomato’s Shares Reach 15-Month High, Surge 11% In Six Days Of Positive Trading

New Delhi, 29th July 2023: Zomato’s share price surged to a 15-month high of Rs 86.37, registering an almost 2 per cent gain on the BSE during Friday’s intra-day trade. This marks the sixth consecutive day of positive trading for the online food delivery company, with a total gain of about 11 per cent over this period.

This impressive surge in Zomato’s shares comes amidst a volatile stock market. At the time of writing this news at 2 pm, Zomato shares were trading at Rs 86.69, representing a 2.08 per cent increase on the BSE. In contrast, the benchmark Sensex was trading at Rs 65,992.48, experiencing a decline of about 0.41 per cent.

It’s worth noting that Zomato shares were previously seen at this price level in April 2022. Over the past year, the stock has demonstrated remarkable growth, rallying nearly 90 per cent from its previous levels. Since hitting its one-year low of Rs 40.55, the stock has surged by almost 101 per cent.

It’s interesting to mention that Zomato’s all-time high was recorded at Rs 169 on 16th November 2021. However, since then, the stock has not reached this peak again.

Looking ahead, the board of directors of Zomato is scheduled to convene on Thursday, August 3, 2023, to consider and approve the unaudited financial results of the company for the quarter ended June 30, 2023 (Q1FY24).

One of the key drivers behind Zomato’s recent stock price appreciation is its better-than-expected operating performance in the March quarter (Q4FY23), which was reported on May 19. Despite muted gross order value (GOV) growth quarter-on-quarter (QoQ), the contribution margin across segments surpassed estimates, leading to positive market sentiment.

In Q4FY23, Zomato also managed to narrow its losses on both a year-on-year (YoY) and a sequential basis. The company’s consolidated loss decreased to Rs 187.6 crore in Q4FY23 from Rs 346.6 crore in Q3FY23 and Rs 359.7 crore in the same quarter of the previous fiscal year (Q4FY22). Additionally, the Earnings before Interest, Taxes, Depreciation, and Amortisation (EBITDA) loss narrowed to Rs 175 crore in Q4 from Rs 265 crore in Q3. Notably, excluding its quick commerce operations, the food aggregator achieved an adjusted EBITDA positive status in the March quarter.

Management has conveyed their expectations for a high single-digit sequential GOV growth in Q1FY24, attributing it to the green shoots of recovery since February 2023.

Furthermore, Zomato’s management has set ambitious goals for the future. They plan to achieve positive adjusted EBITDA and net profit on a consolidated basis (including the quick commerce firm Blinkit) within the next four quarters. To attain this, they aim to focus on profit growth in the food delivery business and reduce losses in Blinkit. Analysts at Emkay Global Financial Services have highlighted this strategy and projected the expansion of food delivery EBITDA to 4-5 per cent of GOV from the current 1.2 per cent.

Based on the company’s superior Q4 performance, the brokerage firm has expressed confidence in Zomato’s ability to execute and deliver profitable growth. The anticipated improvement in consumer sentiment is expected to drive GOV/MTU growth, further supporting their positive outlook. The brokerage firm has recommended a ‘Buy’ rating on Zomato with a target price of Rs 90 per share.