Zomato, Swiggy rally up to 7% as global brokerages remain optimistic

Shares of food delivery companies Swiggy and Zomato in Thursday's trade zoomed up to 7 per cent at the day's high after three global brokerages including CLSA, JP Morgan and Bernstein released their bullish reports on both companies.

At around 11:33 am, Swiggy shares after gaining nearly 6 per cent intra-day to the day's high price of Rs 514.8, pared its initial gains and was up just 0.36 per cent.

Similarly, Zomato also trimmed its day's early gains of up to 7.27 per cent and was last up just 0.82 per cent at Rs 246.

Brokerages on Zomato 

Brokerage               Rating                    Target                                Potential upside 
CLSA                           Buy                   raised to 400 from 370             64%
JP Morgan           Overweight                  340                                        39%
Bernstein             Outperform                 335                                         34%

Hong Kong-based global brokerage CLSA has included Zomato in its high-conviction outperformance list. The brokerage held that even though competition is rising in the space, we cannot neglect the rising total addressable market (TAM). And now after the recent correction, the stock looks attractive. 

Also, the brokerage expects the company's Quick Commerce (QC) business to record rapid growth in profitability over the next three years, with estimates of 51 per cent during FY24-27. CLSA has raised its profit estimates by 2-12 per cent. 

Brokerages on Swiggy

Brokerage               Rating                        Target                 Potential upside 
CLSA                   Accumulate       raised to 750 from 708                 54%
JP Morgan          Overweight                       730                                 50%
Bernstein            Outperform                       635                                 30%

Bernstein's view on Swiggy, Zomato 

Bernstein held that profitability of Zomato's food delivery segment will increase further, while the topline growth shall be aided by the company's Quick Commerce (QC) segment. Meanwhile, Swiggy is drawing benefits from multiple growth drivers. 

JP Morgan's view 

JP Morgan held that both stocks are available at attractive prices for taking positions in them. Most of the dark stores opened outside the top 10 cities during the last month. Dark store in the retail world is a space that's used to fulfill online orders, and is not open to the public.

The brokerage held that there is a big market for QC even beyond the top 10 cities, with Blinkit expanding its presence to more than 90 cities. 

In the first quarter of the ongoing calendar year 2025, Swiggy, Zomato and Zepto plan to open over 200 dark stores. 

Furthermore, JP Morgan acknowledged that Blinkit surpassed its FY25 dark store target ahead of time, reaching 1,000 dark stores by the third quarter of the CY24.

Also, the brokerage noted that the expansion of quick commerce is not expected to significantly affect Zomato's contribution margin and EBITDA.