Zomato’s Stellar Performance Spurs Bullish Investor Sentiment: Brokerages Raise Target Prices After Strong Earnings Report

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Zomato saw its stock lift as it reported a third consecutive quarter of profit on February 8, prompting several brokerages to revise their target prices upwards. Global brokerage Bernstein, for instance, set a new target price of ₹180, rating the firm as “outperform.” Bernstein cited Zomato’s upward revision of its year-on-year revenue guidance from 40% to 50%, suggesting that the food tech company has once again raised the bar for medium-term growth expectations.

Jefferies, another major brokerage, expressed confidence in Zomato’s performance, issuing a buy call on the stock and raising its target price to ₹205, implying a potential upside of up to 43%. Jefferies praised Zomato’s exceptionally strong performance in quick commerce for the quarter and noted smart margin gains in food delivery, although it suggested that growth in this segment could have been stronger.

Maintaining its overweight call, Morgan Stanley kept its target price at ₹150, emphasizing Zomato’s quarterly beat on operating profits and robust cash generation. Meanwhile, HSBC reiterated its buy call and increased the target price from ₹150 to ₹163, citing better-than-expected performance in both food delivery and quick commerce businesses.

Looking ahead, brokerages anticipate a normalization in food delivery growth, while quick commerce is expected to sustain both growth and profitability. Zomato’s December 2023 quarter earnings showed a significant improvement, with a profit of ₹138 crore compared to a loss of ₹347 crore in the same quarter the previous year. Revenue surged by 69% year-on-year to ₹3,288 crore. Zomato’s management remains optimistic, expecting continued growth in gross order value, with a target to achieve adjusted breakeven for Blinkit on or before the June quarter of FY25. Zomato shares closed more than 1% higher at ₹144 on the BSE on February 8.