Zomato stock call: Bernstein says 'buy', analysts bullish on margins, returns; check target price

Bernstein's share price target on Zomato implies 17 percent upside to the last close.

Bernstein brokerage analysts have issued a 'Buy' call on Zomato stock, setting a target price of Rs 230 per share. They cite the company's market leadership, pricing power, and reduced delivery costs as key factors enabling it to achieve expanding margins and improved returns.

Bernstein's share price target implies about 17 percent upside over Zomato's last closing price of Rs 196.69. Zomato stock has given stellar returns, nearly tripling over the last one year.

Bernstein analysts said there are several levers for margin expansion. They also noted that Zomato's ad take rates have significant room for growth -- for global retailers, as much as 4-5 percent of Gross Merchandise Value (GMV) comes from ad income.

Furthermore, Zomato's asset-light model is expected to drive growth in the Return on Invested Capital (ROIC), which is projected to rise from 9 percent in FY25 to 35 percent in FY30. The asset-light approach continues to moderate investment capital intensity, further supporting ROIC growth.

The stock has also jumped nearly 6 percent in the last three sessions, after it was reported that the Zomato will acquire Paytm's movie ticketing business. The announcement got strong endorsements from brokerages, with share price targets going as high as Rs 280.

UBS has issued a buy call on Zomato with a target price of Rs 250 per share as it believes this acquisition aligns well with Zomato's 'going-out' offering. Preliminary calculations suggest that the valuations for this acquisition are reasonable, the brokerage said.

Although neither Zomato nor Paytm disclosed the valuation of the transaction, the potential deal is estimated to be in the range of Rs 1,600 crore to Rs 2,000 crore, according to media reports. If confirmed, this would be Zomato's second-largest purchase since it acquired Blinkit in 2022 for $569 million in an all-stock deal.

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