Swiggy stock surges 23% in seven sessions; analysts divided on future growth prospects

Swiggy shares have been on a tear, gaining 23 per cent over 7 consecutive sessions. On Thursday, the stock surged by 11 per cent to hit Rs 576.95, marking its highest point in recent trading. This remarkable momentum has been fueled by improving business metrics, particularly in the quick commerce segment, and growing investor enthusiasm.

Analysts remain cautious despite recent highs

The rally has breached the Rs 550 target suggested by JM Financial, which recently revised its growth outlook for Swiggy's quick commerce arm Instamart. The firm highlighted sharp improvements in business growth and contribution margins but remains circumspect, citing stiff competition and operational challenges.

Meanwhile, Macquarie has taken a more conservative stance, maintaining an "Underperform" rating with a significantly lower target price of Rs 325. This reflects concerns about Swiggy’s profitability timeline and potential hurdles in achieving scale efficiency in quick commerce operations.

Valuation and competition weigh on sentiment

Despite recent gains, some analysts question Swiggy's valuation. While JM Financial acknowledged the company’s ambitious growth targets, competitors like Blinkit and Zepto have shown stronger traction in achieving unit economics. Swiggy’s dark store expansion and order density improvements are promising, but market observers note that the stock's current levels may already account for most of its foreseeable growth.

Profitability targets under scrutiny

Swiggy aims to achieve profitability by FY27, with projections for incremental margin improvements. Analysts note that maintaining robust gross order value (GOV) growth and increasing average order values (AOVs) will be key to sustaining momentum. However, concerns about rising ESOP expenses and competitive pressures could weigh on its profitability outlook.

Future hinges on execution

As Swiggy navigates a challenging yet opportunity-rich market, its ability to balance growth with cost control and execution efficiency will dictate investor sentiment. For now, the stock’s sharp rally has showcased optimism, but mixed analyst views underline the need for caution.