Meesho shares rally up to 129% from IPO price in just 7 days: Here's why analysts advise caution

The newly-listed shares of Meesho surged up to 18 percent on December 18, extending its bull run since market debut earlier this month. However, analysts have advised caution and listed out why it may be a better for investors to delay purchase of the e-commerce platform's shares.

Meesho shares rose to an intraday high of Rs 254.40 apiece on Thursday, the highest level seen by the stock so far. This marks a whopping 129 percent jump from its IPO price of Rs 111 per share. The stock later pared some gains to close around 8 percent higher at Rs 233.53 apiece.

What lies ahead?

Meesho is a strong long-term business, but the current price after the sharp rally makes the near-term risk reward unattractive, said Abhinav Tiwari, Research Analyst at Bonanza. While he noted that the company’s growth story is convincing, he added that buying shares at such elevated levels won’t fully account for execution risks and the fact that losses are still present.

Meesho’s fundamentals are improving steadily, but valuation is the key risk, the analyst added. "The strong IPO subscription and sharp post listing rise suggest optimism may have run ahead of fundamentals. Given this, waiting for a more attractive price could offer a better risk reward," he said.

The fact that Meesho’s sharp rally has pushed its price way ahead of target prices set by brokerages shows that a large part of the immediate optimism may already have been priced in, said Harshal Dasani, Business Head at INVasset PM.

He noted that the company is still transitioning towards consistent profitability. “At this stage, investor confidence is driven more by the perceived long-term opportunity than by near-term earnings visibility,” he said.