Zomato share price rises over fivefold in 2 years. What should investors do with the stock now?

Zomato share price rises over fivefold in 2 years. What should investors do with the stock now?

MINT | July 9, 2024 | 02:35 PM IST | Breaking News | Follow on Google News

Zomato share price rises over fivefold in 2 years. What should investors do with the stock now?

Zomato share price rises over fivefold in 2 years. What should investors do with the stock now?

Zomato share price rose nearly 3 per cent to hit a fresh all-time high in intraday trade on the BSE on Tuesday, July 9. Zomato shares opened at ₹208.65 against its previous close of ₹207.90 and soon rose nearly 3 per cent to make a fresh all-time high of ₹214. If the stock ends higher, it will be its third consecutive session of gains.

Zomato shares have seen remarkable growth over the past two years. After hitting an all-time low of ₹40.55 on the BSE on July 27, 2022, the stock has surged to a current market price of ₹214. This represents an impressive over five-fold increase, delivering a 428 per cent return from its lowest point.

Can the stock of one of India’s leading online food tech platforms rise further from the current levels?

Some experts and brokerage firms think the stock still has some steam left.

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Fundamental views

Recently, brokerage firm IIFL Securities, which has a buy call on the stock with a 12-month target price of ₹230, believes the stock’s elevated valuations would be supported by consistent growth and strong execution on the profitability across food delivery and quick commerce (QC) segments.

However, the company may face near-term headwinds due to rising competition in the quick commerce segment.

“Our 12-month DCF-based target price of ₹230 implies 8.2 times FY26ii (fiscal year 2026 second quarter) EV/sales (enterprise value-to-sales ratio). The stock is offering 33 per cent revenue CAGR over FY24-27ii and could reach nearly ₹3,000 crore PAT (profit after tax) by FY27ii,” said IIFL Securities.

Another brokerage firm JM Financial also has a buy call on the stock with a target price of ₹230.

“We assign a target multiple of 75 times on Zomato’s Sep’26 EPS (earnings per share) to derive a revised target price of ₹230 versus ₹250 earlier. Despite the revision, the stock remains one of our preferred picks in the listed Internet space. We believe it is well-positioned to benefit from robust industry tailwinds for hyperlocal delivery businesses. Its balance sheet also remains strong with net cash of ₹12,200 crore as of Mar’24 ( ₹12,000 crore in Dec’23),” said JM Financial.

Also Read: Paytm, Zomato and more: StoxBox lists top 7 stock picks to elevate your portfolio

Several global brokerage firms, such as CLSA and Goldman Sachs, also expressed positive views about the stock in June reports.

According to CLSA, Zomato is outpacing its rival Swiggy in growth metrics, while Goldman Sachs underscored the company leads its peers in profitability, which positions it to either expand market share, enhance profitability further, or achieve a combination of both objectives in the future.

CLSA has a buy call on the stock with a 12-month target price of ₹248 apiece. Goldman Sachs also has a buy call on the stock with a target price of ₹240.

Read more: Zomato stock hits fresh record high, posts gains in 14 of last 15 months; is there more upside ahead?

Technical views

Technical experts point out that the stock could attempt to reach the level of ₹250 in the short to medium term.

According to Avdhut Bagkar, derivatives and technical analyst at StoxBox, the stock’s trend remains upward until the support of ₹200 is protected on a closing basis. The short-medium-term outlook aims to reach the ₹250 level, per the technical charts. The stock has yet to enter the overbought territory of the Relative Strength Index (RSI), implying more room to rally furtherm

Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.

MINT