Zomato shares just 4% shy of hitting all-time high; after UBS, Bernstein also gives ‘buy’ call

Shares of food delivery services firm Zomato after a day’s breather are again seeing traction in Friday’s trade (June 21). At the last count, shares of the new-age company traded with gains of 0.89 per cent at Rs 198.7, while at day’s high it scaled to levels of Rs 199.9, just 3.7 per cent away from hitting its all-time high price of Rs 207.3.

Today’s surge in Zomato’s share price may be partially fuelled after global brokerage Bernstein maintained its ‘buy’ rating on the counter with a target of Rs 230, implying probable gains of nearly 17 per cent from the previous close.

They believe that the company’s market leadership, pricing power as well as lower delivery costs are enabling it to realise expanding margins and better returns.

Further analysts at the brokerage stated that there are multiple levers for margin expansion.  They pointed out that the company’s ad take rates exhibit significant room for growth- for global retailers 4-5 per cent of the GMV or gross merchandise value is derived from ad income. 

Also, the company’s asset-light model is estimated to fuel growth in the ROIC or Return on Invested Capital, which is estimated to increase from 9 per cent in FY25 to 35 per cent in FY30. The asset-light model is driving ROIC growth as investment capital intensity continues to moderate.

Earlier, after Zomato confirmed initial talks with Paytm for acquisition of the latter’s ticketing business, global brokerage UBS maintained its ‘buy’ rating and suggested a target of Rs 250 apiece on the stock.

Zomato's share price performance

Zomato shares in the past one year have rallied over 159 per cent, more than trebling investors' wealth in the stock.