Zomato makes solid gains; clinches to new all-time high: Here’s what is boosting stock’s rally

Zomato shares in a subdued market extended their previous gains and marked their fresh all-time high in Friday’s trade (April 12, 2024) as the domestic brokerage JM Financial maintaining a bullish view on the counter yet again signalled a ‘buy’ with a higher target of Rs 260, suggesting potential gains to the tune of over 32 per cent.

In its report, JM Financial highlighted the meteoric rise of Blinkit which is seeing no slowdown 

“Zomato’s quick commerce business Blinkit continues to grow exponentially and there are no signs of it slowing down. While this was also implied in the management’s consolidated adjusted revenue growth guidance of 50% plus in the near term, recent media reports suggest the company will double-down on its investments to growth,” said the report. The brokerage sees a meaningful proportion of the projected investments to come after Blinkit turns Adj. EBITDA break-even, which we expect to happen in 1QFY25. This will likely ensure that Zomato’s quick commerce business will exceed the size of its food delivery business in GOV ( gross order value) terms, much earlier than what we had built in.

 It will also ensure that Blinkit builds long-term scale moats against continued threats of growing competition. 

The brokerage hence has raised its GOV/Revenue estimates for Blinkit by 15-41 per cent over FY25/26, which primarily leads to a change in our SOTP-driven Mar’25 FV for the Zomato stock to INR 260 as against Rs 200 earlier.

Also, on the sidelines ahead of Swiggy’s IPO, the company plans to offer the company’s shares at a discount of up to 20 per cen to HNI investors. The company will offer the shares at a rate of Rs 350 apiece. Currently, the food services aggregator also running the Quick Commerce platform is valued at Rs 1 trillion.

On the eve of Id on Thursday, the company’s order bookings saw a surge of 34 per cent between 5:30 pm and 7 pm. Lately, ahead of the IPO offering by the firm, Invesco raised the company’s valuation to to $8.5 billion from $12.7 billion. Since October 2023, the company's valuations have been raised 49 per cent to $12.7 billion, while from January 2022, the increase in valuation is to the tune of 19 per cent as per the research desk. Invesco holds a nearly 2 per cent stake in  the food delivery services firm.