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Zomato shares surge 48% in last one month, brokerages raise target price

The stock hit a low of Rs 50 a share on 11 May and it was trading its near issue price of Rs 74.4 a share on Tuesday, up 4% from its previous close.

May 31, 2022 / 02:01 PM IST
 
 
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Shares of Zomato Ltd surged over 48 percent in the last one month as brokerages upgraded its target price after its March quarter earnings.

The stock hit a low of Rs 50 a share on May 11 and it was trading its near issue price of Rs 74.4 a share on Tuesday, up 4 percent from its previous close.

Broking house Morgan Stanley has kept the 'overweight' rating on the stock with a target at Rs 135 per share. Research firm UBS has maintained a 'buy' rating on the stock with a target price of Rs 130 per share. Edelweiss Capital has upgraded the stock to buy from hold and set price target at Rs 80. Spark Capital has raised recommendation to buy from add on the stock and set target price at Rs 90 a share.

Zomato's consolidated net loss for the quarter ended March widened to Rs 360 crore compared to Rs 134.2 crore the same time last year.  Revenue from operations were at Rs 1,211.8 crore, up 75.01 per cent compared to Rs 692.4 crore in the same quarter last year.

Analysts said Zomato reported significant sequential improvement in all key operating and financial metrics in the fourth quarter of FY22. What was even more impressive were the disclosures and management willingness to address street concerns both through a shareholders letter as well as post results conference call.

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With a dual focus on growth and profitability, management guided for sequential top line growth to accelerate to double digits in the first quarter of FY23 (despite supply side challenges in some cities) while Adj. EBITDA losses are also expected to decline meaningfully. The firm mentioned that its contribution profit was positive in 120 cities in FY22 (out of its top 300 cities versus just 5 in FY20) while indicating that group contribution profits could inch towards double-digits in the long term, analysts added.

"We remain bullish on Zomato’s long-term growth prospects in the hyper local delivery space as it is well positioned to benefit from robust industry tailwinds such as improving tech penetration and rising income share of digitally native millennials or GenZ. We also retain a positive view on the company’s other hyper-local ecosystem investments (i.e. beyond core food delivery) as they could lead to bundled offerings that would not only help it improve customer engagement, retention and ordering frequency but also drive operational synergies," JM Financial report said.

Since the start of the year, the stock was under pressure and declined nearly 65 percent as fall in global equity markets amid expected tightening by global central banks.
Moneycontrol News
first published: May 31, 2022 02:01 pm
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