Shares of Zomato dropped almost 4% on January 7, trading at ₹254.75, after Jefferies downgraded the stock to ‘Hold’ from ‘Buy.’ The brokerage firm cited increasing competition in the quick commerce (Q/C) segment as a significant concern, potentially impacting the company’s medium-term profitability. The target price for Zomato has been reduced by nearly 18% to ₹275 from ₹335.
As of 9:33 am the shares were trading 3.66% lower at ₹255.15 on NSE.
Key Highlights:
- Quick Commerce Competition:
- Quick commerce, initially viewed with scepticism due to its 10-15 minute delivery model, has gained traction in major metros and cities.
- Jefferies flagged heightened competition from both existing players and new entrants, which may result in increased discounting and impact profitability.
- Cut in Profitability Estimates:
- Blinkit’s EBITDA forecast for FY26E-27E has been slashed, and the target multiple halved to 6x.
- Zomato’s overall EBITDA estimates have been lowered by 12% (FY26E) and 15% (FY27E).
- Profit estimates have been reduced by 17% (FY26E) and 18% (FY27E), with EPS estimates for these periods revised downward by 20% and 21%, respectively.
- 2025 Outlook:
- Despite strong execution and market opportunities, Jefferies expects 2025 to be a year of consolidation for Zomato, following a stellar performance in 2024 where the stock doubled in value.
TOPICS:
Zomato