Zomato stock falls 4% despite UBS' increased target price, 30% upside

The Zomato shares have rocketed 261 percent in the last one year.

Shares of Zomato Limited slipped 4 percent to Rs 185 in early trade on April 15 as benchmark indices slipped on Iran's large-scale military attack on Israel and a possible delay in interest rate cuts by the Fed.

This comes despite analysts at UBS raising the target price to Rs 250 on the back of positive growth prospects for the food delivery major.

With a buy call on the stock, the new price target implies an upside potential of 30 percent from the last close of Rs 192. The international brokerage's previous target price was Rs 195.

Follow our live blog for all the market action

The company's quick commerce growth and margin potential is under appreciated. Analysts also expect that the company's EBITDA margin could touch 9 percent, almost two times the consensus. EBITDA is earnings before interest, tax, depreciation, and amortisation.

"The total addressable market and unit economics framework suggests FY24-29 gross merchandise value could grow at a compounded annual growth rate (CAGR) of 45 percent," the brokerage said in a recent note on the company.

Last week, JM Financial Institutional Securities Ltd has raised Zomato's target price to Rs 260 from Rs 200, citing continued exponential growth of its quick commerce arm Blinkit.

The brokerage noted the firm's Blinkit business continues to exhibit strong momentum and anticipates the company to further accelerate the growth of its quick-commerce segment.

In the December quarter, Zomato's food delivery business saw a 30 percent year-on-year rise in adjusted revenue, reaching Rs 2,025 crore on a consolidated basis. Meanwhile, Blinkit's revenue doubled to Rs 644 crore during the same period. Zomato recorded a consolidated net profit of Rs 138 crore, a significant improvement from the net loss of Rs 347 crore in the corresponding period last year.

Zomato's shares have rocketed 50 percent since the start of the year.

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.