Zomato shares close nearly 15% higher a day after March quarter results; Zee Business decodes why stock surged

Food aggregator Zomato Limited shares closed nearly 15 per cent higher at Rs 65.5 per share on the BSE. In the process, the stock touched an intraday high of Rs 67.6 per share, gaining almost 19 per cent on Tuesday on an intraday basis. The surge in the stock came mainly a day after the company reported its quarterly results. 

Zee Business Senior Research Analyst Arman Nahar listed out few reasons behind the jump in the Zomato shares.  

“The company’s adjusted EBITDA has been declining for the last three quarters. It mulls to improve Gross Order Value (GOV) by double-digit in the long run and has started operations in the 300 new cities during Q4,” the senior research analyst said. 

He added, that Zomato has around Rs 12200 crore cash and bank balance which is 25 per cent of market capitalization, and the management has been reiterating that it is focusing on profit and EBITDA along with growth, and also clarified that it has no further intention to buy a minority stake in any firm. 

क्यों #Zomato में आज दिख रहा है एक्शन?

जोमैटो के नतीजों में ऐसा क्या खास?

क्या है जोमैटो का आगे का प्लान?

कहां है जोमैटो का फोकस?

जानिए अरमान नाहर से पूरी डिटेल्स....@ArmanNahar #ZomatoQ4 pic.twitter.com/DsQzLiul59

— Zee Business (@ZeeBusiness) May 24, 2022

According to Choice Broking Executive Director Sumeet Bagadia, the bounce-back of Rs 68-70 levels in Zomato shares is possible. However, his advised to investors is to stay away from the stock as it may create a new low once this bounce back fades away as the counter is weak on charts.  

Global brokerage firm Morgan Stanley said Zomato’s Q4 numbers were in-line with the estimates with improved transparency on segment disclosures. It added that the company gave a better outlook for Q1 and a trigger framework around capital allocation.  

The brokerage also said Zomato is working in the right direction and needs consistent execution to meet high expectations. It maintained an Overweight stance with a target price of Rs 135 per share. 

The stock has been witnessing continuous weakness as it slipped nearly 54 per cent year-to-date and also trading below its issue price of Rs 76 per share at the upper band.