Zomato share price tumbles up to 6% after climbing all-time high: Should you buy the dip?
Zomato shares tumbled sharply after gaining for six days in a row last week. Technicals indicate the mild correction.
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Zomato share price tumbled by as much as 6 per cent to day's low price of Rs 269.5 per share (September 16) in Monday's trade from its all-time high price hit on Friday primarily on profit booking. At the last count, shares of the new-age company gained sentiment and were up by a tad at Rs 273.75 per share, up 0.31 per cent.
The new-age company stock has been gaining ground and since the start of the year has climbed over 121 per cent, while its 1-year return is at over 166 per cent.
Lately, global brokerage Jefferies maintained its buy on the stock with a target price of Rs 335 per share. Similarly, Bernstein also maintained outperform call on the stock with a target of Rs 330.
Zomato's fundamentals
Siddhesh Mehta, Research Analyst, SAMCO Securities said, "Zomato has demonstrated strong progress, achieving profitability by leveraging operating efficiencies, margin expansion, and increasing average ticket size. The company’s strategic alignment with its Hyperpure and Blinkit ventures is driving operational synergies, while efforts to optimize processes are underway.
The company is focused on enhancing service quality and expanding SKU (stock keeping units ) offerings in the fast-growing quick commerce segment (QCS), while maintaining its delivery speed edge. However, margin improvement remains a key area of focus, alongside evaluating the long-term impact of promotional strategies, added Mehta.
With plans to open 2,000 Blinkit stores by March 2026, Zomato is positioning itself for growth.
With the company’s stock price surging by over 100% in the past one year, Zomato presents a compelling long-term investment opportunity, added Mehta.
The management's focus on maintaining profitability, even as competition intensifies and expansion costs rise, reinforces the company's strong growth potential.
Technicals
Om Mehra, Technical Analyst, SAMCO Securities held that the stock is firmly trading above the 20-DMA, signalling sustained strength. Zomato maintains a higher-high and higher-low formation during the daily time frame. The stock displays a positive structure, with daily and weekly Relative Strength Index (RSI) holding above the 60 level. However, a bearish engulfing pattern appeared on the daily chart suggests that the ongoing momentum might pause and a short-term correction cannot be ruled out, which could be healthy for the long run.
Zomato is expected to gain strength once it crosses the key resistance at Rs 287, potentially it may extend towards the Rs 315-320 level. The stock can be accumulated in the Rs 260-270 zone.
Bernstein's view on Zomato
The brokerage is of the view that the quick commerce economy continues to break all stereotypes. QC is a compelling product & all consumers are embracing it and Zomato remains at the center of the QC economy, added the brokerage.
Furthermore, as per the brokerage, the company is prioritizing long-term leadership over short-term profitability.
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Updated: Mon, Sep 16, 2024
02:52 PM IST
02:52 PM IST
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