Zomato hits record high; shares vault over 200% in 1 year; what is working wonders for the company?

Zomato share price today, Zomato hits record high: The spectacular rally in the shares of Zomato proves to be an excellent case study that every finance and business person should take a close look at. The stock, whose listing event in July 2021 matched the enthusiasm of a celebrity wedding in India, soon fell out of favour as analysts raised concerns about the company's profitability. 

Further, the Deepinder Goyal-led company's decision to acquire Blinkit in 2022 made investors unhappy, which resulted in the free fall of Zomato shares. Besides, competition from Swiggy and possible threats from the government-launched platform ONDC all made the majority of analysts wary of the company's prospects.

However, shutting down all criticisms, the company amazed the street last year when it posted its first-ever profit for the June 2023-24 quarter, helped by a tax gain and strong orders in its food and grocery delivery businesses.

Zomato reported a profit one quarter earlier than expected.

In its earnings release, the company said that it expects its business to remain profitable going forward while delivering 40 per cent year-on-year topline growth for at least the next couple of years. 

Gross order value (GOV)—the total value of all orders, a percentage of which Zomato gets as revenue—rose 13.9 per cent in its food delivery business.

GOV, for its quick delivery business Blinkit, surged 82.6 per cent during the said quarter year-on-year, growing 4.6 per cent sequentially. It faced a temporary business disruption in April resulting from a change in the payout structure for delivery partners.

On Friday, March 1, 2024, Zomato shares hit a new milestone as the stock of the food services aggregator jumped as much as Rs 7.95, or 4.8 per cent, to hit an all-time high of Rs 173.45 on the BSE, surpassing an earlier peak of Rs 169.10 touched on November 16, 2021. In the last one year, shares of the company have zoomed over 200 per cent.

Commenting on the meteoric rise in Zomato shares, Sudip Bandyopadhyay, Group Chairman at Inditrade Capital, said, "What worked for Zomato is that the company focused on profit after listing, which was a big question at that time. The management has worked hard and turned the company profitable, which has enthused investors, leading to the market rewarding Zomato handsomely."

Terming the scope as huge, the expert added that the company is in somewhat of a duopoly kind of situation, which gives them an unfair early mover advantage. 

Independent market expert Ambareesh Baliga said the acquisition of Blinkit, which initially raised eyebrows, is now working well for the company. 

The market expert said that initial fears of competition from ONDC and the underperformance of the company led to a correction after its listing. However, in the past 12 months, there has been extremely good growth, a rise in the food delivery business, a good customer base, and contributions from other verticals that have worked for the company, which has been profitable since the last three quarters, the market expert added. 

Zomato share price target: Should investors buy the counter at current levels? 

The stock has already moved up a lot, "so I won't recommend a buy at current levels. It is better to wait for some correction," Bandyopadhyay suggests. On the other hand, Baliga says long-term investors can buy the stock at current levels if a 10-15 per cent correction isn't bothersome for them.

What lies ahead?

Sudip Bandyopadhyay says that in the long term, Zomato is a good bet on the Indian consumption story and should continue to do well. 

Rakesh Bansal of Rakesh Bansal Ventures, in an interaction with the Zee Business channel, termed the Zomato-acquired quick commerce company Blinkit as interesting and said that the company has a strong network even in several places beyond Tier 1 areas. "Delivery content is beyond imagination," the market expert added.

Zomato share price history

Zomato's stock has rewarded investors with over 200 per cent returns in the last 12 months, outperforming the headline index Nifty50, which rallied over 27 per cent. So far this year (January 1, 2024), the counter has gained over 30 per cent, while it has rallied over 70 per cent in the last six months.

Zomato Q3 result: How did the company fare in the Oct-Dec quarter?

Zomato reported a consolidated net profit of Rs 138 crore in the December quarter. Consolidated revenue from operations in the third quarter of the ongoing fiscal stood at Rs 3,288 crore as against Rs 1,948 crore a year ago. Total expenses were higher at Rs 3,383 crore. The same was Rs 2,485 crore in the corresponding period a year ago.

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