Zomato added to CLSA’s 'High Conviction' list with Rs 400 target price, sees 64% upside potential

Zomato shares had more than doubled in value in 2024.

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Hong Kong-based brokerage CLSA reiterated its 'outperform' rating on restaurant aggregator Zomato Ltd, adding the firm to its 'high conviction' list, amid the ongoing correction in the stock.

CLSA also hiked the target price to Rs 400 per share, indicating a 64 percent upside from current levels. The recent correction in the stock price, which has fallen 20 percent from its 52-week high, is an opportunity to invest in the leading player in quick commerce and food delivery.

According to CLSA, the quick commerce profit pool is poised for rapid growth, with an expected 51 percent revenue CAGR over FY24-27.

While Zomato's Q3 quick commerce margins may soften due to accelerated expansion, the broader profit pool is projected to expand significantly over the next three years.

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Global brokerage firm Jefferies had downgraded shares of Zomato to  'hold' earlier this month, citing the sharp run-up in the stock through 2024 and concerns over rising competition in the quick commerce space.

After Zomato’s shares more than doubled in value in 2024, analysts at Jefferies predict that 2025 could be a breather year, with the stock likely shifting gears into a phase of price consolidation. Factoring that in, Jefferies also slashed its price target for Zomato by 18 percent to Rs 275.

In November, brokerage firm Macquarie had retained its 'underperform' call on the stock, despite the stock rallying during that time. The firm had then cited potential downside risks that could reduce the stock's value by around 50 percent.

Zomato shares had more than doubled in value in 2024. The stock had surged over 123 percent from Rs 124 in the beginning of the year to Rs 278 by year-end.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.