Zomato Shares Fall 7% as Q3 Losses Widen But Most Analysts Maintain ‘Buy’ Rating; Here’s Why

Zomato Share Price: Shares of online food delivery aggregator Zomato plunged 7.4 per cent to Rs 50.35 in Friday’s trade after it reported a larger-than-expected quarterly loss on Thursday, flagging slow growth in the food delivery business due to an industry-wide slowdown. The company’s consolidated net loss for Q3FY23 widened to Rs 347 crore against Rs 63 crore registered in the same quarter last year. For Q2FY23, the net loss stood at Rs 251 crore.

Meanwhile, the Gurugram-headquartered company’s revenue from operations zoomed 75 per cent to Rs 1,948 crore year-on-year (YoY) as against Rs 1,112 crore in the corresponding quarter last year. Sequentially, revenue improved by 17 per cent as against Rs 1,661 crore reported for Q2FY23.

Zomato’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) loss increased to Rs 265 crore in the December quarter as compared to Rs 192 crore in the quarter ended in September 2022. Adjusted EBITDA loss stood at Rs 272 crore in the corresponding quarter of the previous year.

The December quarter was the first full quarter of the consolidation of the grocery business Blinkit. The adjusted revenue grew 66 per cent YoY to Rs 2,363 crore, led by a 30 per cent growth in the food delivery business.

Excluding Blinkit business, Zomato turned positive at the operating level in January even as the food delivery business witnessed a slowdown.

Should you buy, sell or hold Zomato’s stock? Here’s what analysts say:

Citi maintained its buy rating on Zomato with a target price of Rs 76 post the December quarter results. The management highlighted recent green shoots.

“The food delivery business has seen lower growth. Zomato should be able to fine-tune the mix with greater focus. Competitive intensity isn’t high, and we believe that the long-term growth story remains intact,” it said.

Morgan Stanley maintained its overweight rating on Zomato post Q3 results with a target price of Rs 82.

The company reported a beat on unit economics, but growth slowed down, said the brokerage. GOV growth of 0.7 per cent was led by AOV growth as orders declined QoQ.

Unit economics in core business surprised positively, and the management is confident about its break-even target, it said, adding that quick commerce is showing good traction.

Goldman Sachs has maintained buy rating on the stock with a target at Rs 100 per share.

The food delivery GOV growth was weak, though broadly in-line with consensus. The adjusted revenue growth driven by strong growth in Blinkit & Hyperpure segments.

There was a decline in MTUs & order frequency in food delivery, with no visibility on demand revival. Also, decline in food delivery take rate, largely due to lower delivery fee.

There is near-term potential pressure on profitability from dark store expansion, launch of Zomato gold, reported CNBC-TV18.

Meanwhile, brokerage house Nomura has kept ‘reduce’ rating on the stock with a target at Rs 50 per share.

The food delivery business and GOV growth disappointed in a seasonally strong quarter. The contribution margin expansion is in-line with guidance retained.

Blinkit is in early stage but reporting strong sequential movement. The high growth with high margin cannot come together, reported CNBC-TV18.

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