Zomato shares hit new-life high for 4th straight session; up 25% in 4 days – know what’s driving the scrip

For the fourth straight session, the shares on Zomato have hit a new all-time high during Tuesday’s session to Rs 169.1 per share, after surging almost 9 per cent on the BSE intraday trade. The stock surged nearly 25 per cent in four days amid multiple triggers, including investment announcements.

The company’s net loss widens during the September-end quarter of the financial year 2021-22 (Q2FY22), to Rs 434.9 crore as compared to Rs 360.7 crore quarter-on-quarter. On the contrary, revenues jumped by 21.2 per cent to Rs 1,024.2 crore in Q2FY22 versus Rs 844.4 crore QoQ.

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The counter has been trading higher on multiple traits, including a $1-billion investment in the next two years and also picked up stakes in Shiprocket, MagicPin, and CureFit during the quarter. 

The company in its filing said, the losses rose during Q2 amid investments in the growth of its food delivery business, especially in areas like branding, marketing, geographical expansion. Besides, also due to increased delivery costs arising from “unpredictable weather and increase in fuel prices”. 

The food aggregator in a statement also said that its increased marketing and promotions have resulted in a higher average monthly transaction user (MTU) at 15.3 million during the quarter versus 12.3 million MTUs in the previous quarter. 

Zomato has surged over 130 per cent from its issue price of Rs 74 per share at the upper end, the stock was first a startup company to list on the exchanges on August 23, 2021, with a premium of over 60 per cent on both NSE and BSE.

According to Rahul Shah, Co-Head of Research, Equitymaster, “Zomato remains in the 'too hard to analyse' bucket for us unless we can be sure it has a business model that can deliver profits on a consistent basis. And, don't think it has reached that point yet.”

Shah expresses that although it's market value of more than a lakh crore makes it eligible to be included in a lot of large cap funds, we are more comfortable investing in a company earning 500 crore profits now versus the one that is likely to do so in the near future.

“A bird in the hand is certainly worth a lot more to us than the two in the bush for we don't know exactly how many birds are there and when exactly will they fly out. Hence, we are staying out of this one for now”, he added.