Nykaa Shares Tank Another 7% To Hit Fresh All Time Low; What Should Investors Do?

Nykaa share price today: Share price of FSN E-Commerce Ventures (Nykaa) continued its southward journey on Friday. The stock tanked 7 per cent to slip below the Rs 1,000 mark for the first time and hit a record low of Rs 975.50.

The new-age stock which nearly doubled on listing day on November 10 last year is now down about 62 per cent from its 52-week high at Rs 2,574.

Ahead of the expiry of the mandatory one-year lock-in period for pre-IPO investors, the stock has been under selling pressure and lost its status of an exceptional star performer in the pack of newly listed tech stocks.

JM Financial is of the view that around 67 percent or 31.9 crore shares of Nykaa are likely to open for trade on the expiry day. Steadview Capital Mauritius Ltd, TPG Growth IV SF Pte. Ltd, Lighthouse India Fund III, along with HNIs like Harindarpal Singh Banga, Narotam Sekhsaria and Sunil Kant Munjal will be eligible to sell their holdings.

Today’s sell-off in Nykaa, which is scheduled to announce its September quarter numbers on November 1, comes amid a carnage in US tech stocks with Meta sinking over 24 per cent and Amazon nearly 20 per cent.

What Should Investors Do Now?

Tirthankar Das, Technical & Derivative Analyst, Retail, Ashika Stock Broking suggests sell on rise strategy in the case of Nykaa stock.

“Consecutive lower low formation in both weekly and daily time frame indicates that the trend in the stock has been methodically negative. However, amid such negativity, prices are at an extreme oversold conditions in the daily time frame. Hence, a relief rally or a consolidation in prices can be seen before swaggering back to its negative momentum. Outlook in the stock is likely to remain negative until and unless it trades above the recent swing high of Rs 1,350 which seems to have a feeble chance. Hence, ideal approach should be to sell on rise as fresh sell crossover is seen MACD in weekly time frame as well. Lower target from 161.8 per cent & 178.2 per cent projected retracement comes around 950 and 930 respectively, ” said Das.

Despite the recent correction, brokerages are bullish on the stock.

Kotak Institutional Equities in a note last week said that the cost of digital advertising is set to remain elevated for Nykaa, given high competition among brands to target specific customers and high cost of influencers. “Nykaa’s BPC business should continue to be unaffected, as it is an advertising platform itself; the fashion business could see elevated ad spends. We bake in delayed profitability of this vertical, resulting in a 16-21 per cent cut in the FY2023-25 EPS and a new FV of Rs 1,640. The stock price correction is an opportunity to BUY,” it said.

“The concern that we see is that post IPO there was a huge run-up in the stock prices. The valuation is difficult to project or justify based on traditional metrics because these are new-age businesses. There was a huge demand from some global funds. Now global tech is not doing well. Some of these funds are waiting for or reducing their positions in these new-age businesses,” said Siddhartha Khemka, Head of Retail Research, Motilal Oswal Financial.

However, he is confident that the stock will do well in the long run.

“Nykaa continues to invest in growing new businesses along with having resilient unit economics of BPC and fashion vertical driven by a focus towards driving higher conversion and quality traffic. Further, investments in the differentiated value proposition of content, curation, and convenience are yielding results,” ICICI Securities said.

The domestic brokerage has a hold rating on the stock with a target price of Rs 1,250.

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