Jefferies has downgraded Zomato to ‘Hold’ from ‘Buy,’ citing concerns over rising competition in the quick commerce (Q/C) segment, which could challenge the company’s medium-term profitability. The brokerage has also slashed its target price for Zomato by ~18% to ₹275 from ₹335.
According to Jefferies, Q/C, once met with scepticism regarding its 10-15 minute delivery model, has now become mainstream in top metros and cities. While Zomato’s execution and market opportunities remain strong, the brokerage anticipates 2025 to be a year of consolidation for the stock after its share price doubled in 2024.
Jefferies highlights aggressive moves by competitors and new entrants in the Q/C space, which may lead to increased discounting and erode profitability. This has prompted a sharp cut in Blinkit’s EBITDA forecast for FY26E-27E, with the target multiple halved to 6x. Zomato’s overall EBITDA estimates have been reduced by 12% for FY26E and 15% for FY27E, while profit estimates have been lowered by 17% and 18% for the same periods. Additionally, EPS estimates for FY26E and FY27E have been reduced by 20% and 21%, respectively.
Despite these concerns, Jefferies notes that valuations are not excessively expensive, but the rise in Q/C competition creates significant challenges to maintaining profitability.
