Zomato share price surged nearly 19 per cent in morning trade on Friday, August 2, to hit a fresh all-time high of Rs 279, a day after the company reported its April-June quarter (Q1FY25) results.
The June quarter results of online food delivery giant Zomato Ltd were better-than-expected on many counts. The Zomato management guided for 20 per cent-plus growth in the short term in Food Delivery (FD) business and set a target to increase Blinkit’s dark store count from 639 in June quarter to 2,000 by end-CY26.
Zomato is likely to balance its growth and margin ambitions in the near term, said Nomura India. The foreign brokerage does not see any risk to Zomato’s medium-term aspiration of 4-5 per cent adjusted Ebitda margin in the FD segment. Nomura India is projecting a 20-23 per cent YoY growth in FD gross order value (GOV) in FY25-26, with contribution margin of 7.5 per cent, up 60 bps against FY24.
“We note that Zomato’s high growth path with improving profitability has significant room to go in both the FD and Q-commerce businesses. We raise our target price to Rs 280 factoring in higher long-term growth in Blinkit. We raise FY25-26F Ebitda by 26-60 per cent. Key risks include capital allocation of $1.5 billion cash and slowing growth in FD and Q-commerce businesses,” it said.
What Should Investors Do?
Brokerage firm CLSA has maintained its “buy” recommendation on food delivery aggregator Zomato Ltd. and raised its price target to Rs 350 from Rs 248 earlier. This is the highest price target for the stock on the street after it reported its June quarter results on Thursday afternoon.
CLSA has also raised its earnings estimates by 6% to 36% for Zomato between financial year 2025 – 2027, saying that Blinkit saw improved performance despite a sharp acceleration in dark stores.
Along with CLSA, Motilal Oswal is the other brokerage which has a price target of Rs 300 now for Zomato. It wrote in its note that Blinkit is offering a generational opportunity to participate in the disruption of industries such as retail, grocery and e-commerce.
Motilal Oswal expects Zomato to report margins of 4% and 8.7% in financial year 2025 and 2026, adding that Blinkit “notoriously defies any attempts to value the stock fairly.”
Equirus and ICICI Securities are the other two firms that have a target of Rs 300 or more on Zomato.
Out of the 28 analysts that have coverage on the food delivery aggregator, 25 of them have a “buy” rating, while the other three have a “sell” rating.
Morgan Stanley too has retained its “overweight” rating on the stock with a revised price target of Rs 278. The brokerage earlier had a target of ₹235 on the stock. Morgan Stanley believes that Zomato’s aspiration of 20%+ growth in food delivery, aspiration to hit 2,000 stores by 2026-end in quick commerce and launching a new app for “going out” segment indicates robust revenue growth momentum.
Nomura now has a price target of Rs 280 on Zomato from Rs 225 earlier along with a “buy” recommendation. The brokerage believes that Zomato’s high growth path with improving profitability has “significant room to grow in both food delivery and quick commerce businesses.”
Jefferies believes that Blinkit’s plans to reach 2,000 stores, though positive, may result in some volatility ahead, particularly on profitability. However, it still has a “buy” rating on the stock though, with a price target of Rs 275 from Rs 230 earlier.
So far this year, Zomato stock has zoomed 105 per cent, more then doubling investors’ money. In comparison, benchmark Nifty 50 rose 14 per cent during this period.
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