Zomato shares fell over 5% on May 31 after Macquarie predicted the food delivery company’s stock could drop by nearly 50% in the next year because of increased competition in the quick commerce sector.
At 11:33 am, Zomato shares were trading at Rs 173.80 each on the NSE.
Macquarie maintained its “underperform” rating on Zomato, setting a price target of Rs 96, indicating a potential 46% drop from Thursday’s closing price.
Macquarie has rated Zomato as ‘underperform’ since May last year, downgrading it from a ‘neutral’ call. This ‘underperform’ rating is equivalent to a ‘sell’ recommendation, making Macquarie one of only three brokerages advising investors to exit the stock.
Analysts at Macquarie cited rising competitive pressure as the main reason for their caution, particularly with JioMart’s plans to launch 30-minute grocery delivery in several cities starting next month and expanding further.
Reliance Industries-owned JioMart aims to offer 30-minute grocery services in eight cities initially, expanding to the top 20-30 cities in the first phase.
Macquarie also sees potential downsides for both consensus forecasts and margins for “Blinkit,” contrasting Goldman Sachs’ recent positive valuation, which valued Zomato’s quick commerce arm higher than its main food delivery business.
Blinkit turned EBIT positive in the March quarter of FY24, with revenue more than doubling year-on-year to Rs 769 crore.
Zomato reported a net profit of Rs 175 crore for the same period, a significant improvement from a net loss of Rs 188 crore in the previous year. This increase in net profit was also supported by a 37% rise in other income to Rs 235 crore.
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