Zomato shares extend gains to 4th straight day; UBS maintains buy, target implies over 32% upside
As food services aggregator company Zomato has confirmed its ongoing discussions to acquire Paytms ticketing business, global brokerage has maintained its buy with a target of Rs 250 per share.
Zomato shares zoomed on Wednesday, continuing to rise for the fourth session in a row with huge volumes. The stock of the food delivery company gained as much as four per cent to Rs 195.9 apiece after the company acknowledged ongoing discussions for acquiring digital payments company Paytm's movies and ticketing business.
At 11 am, Zomato shares held on to much of their intraday gain, trading up 3.7 per cent at Rs 195.7 apiece on BSE. As many as 45.3 lakh Zomato shares changed hands in intraday trade so far as against a daily average of 32.9 lakh recorded in the past two weeks, according to provisional exchange data.
“We acknowledge that we are in discussions with Paytm for the aforementioned transaction, however, no binding decision has been taken at this stage that would warrant a Board approval and subsequent disclosure in accordance with applicable law,” said the company in an exchange filing on Sunday.
The company made the voluntary disclosure for clarifying its stance on the matter given that any transaction that is considered potentially meaningful may create uncertainty in the market.
The above discussion is being undertaken with an intent to further strengthen our Going-out business and is in line with our stated position of focusing only on our four key businesses currently, added the filing.
At the time of writing this copy at around 10:29 am, shares of Zomato were up 3.66 per cent at Rs 195.6. Considering today’s day high price, the stock is just 5.82 per cent shy of scaling its 52-week high price of Rs 207.3.
What should you do with Zomato shares now?
Global brokerage UBS maintains its ‘buy’ rating on the counter with a target of Rs 250, implying potential gains of over 32 per cent from the last closing price of Rs 188.70.
The brokerage said the company has confirmed discussions to acquire Paytm’s ticketing business and this goes well with Zomato’s "going-out" offering.
Further, back-of-the-envelope calculations suggest reasonable valuations of the food services player, according to the foreign brokerage.
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