Over the past year, Zomato’s share price has surged approximately 270 percent. And experts believe the stock’s rally could continue as the food-delivery. Investors expect the company to report a strong Q4FY24 performance, further boosting their sentiment.
The stock has enjoyed a robust bull run. Staying in the green on a monthly scale since April of last year. On Friday, April 5, Zomato’s share price climbed about 3 percent to reach an all-time high of ₹191.90. On the BSE, before cooling off and ending 1.90 percent higher at ₹190.50.
What’s driving this new-age tech stock’s performance? Zomato’s stable quarterly results have captured investor attention, and the impressive performance of its quick commerce arm, Blinkit, has further instilled confidence.
Blinkit’s gross order value (GOV) grew 28 percent sequentially, with the business expanding due to new store additions and enhanced customer engagement efforts. India’s growing food delivery market suggests Zomato’s GOV will continue to rise, even without significant market share gains.
Brokerage firm ICICI Securities, which has a buy rating on the stock with a target price of ₹300. Believes the food delivery market can grow at a CAGR of more than 20 percent year-on-year to reach $40 billion by FY33E. This implies that Zomato’s food business GOV can grow more than 20 percent year-on-year until FY33E, even without significant market share gains.
Zomato and Blinkit Surge: Impressive Growth, Positive Outlook, and Bullish Momentum
Kotak expects Blinkit to report a contribution margin (CM) of 3.3 percent. As a percentage of GMV up from 2.4 percent reported in Q3. This results in an EBITDA loss of ₹45.6 crore, lower than the loss of ₹89 crore (pre-Ind AS 116) reported in Q3. Kotak has retained a buy rating on the stock, raising the target price to ₹210 from ₹190. As it believes Zomato is well-positioned to gain market share in the near term amid low competitive intensity. With healthy momentum in the food delivery business.
Parth Shah, a research analyst at StoxBox, highlighted that Zomato’s food delivery segment remains strong. With Blinkit’s business recovery contributing to further traction. He expects Blinkit to lead the next phase of growth for the overall business due to new store additions. Higher efficiency from existing stores, growing customer adoption of 10-minute grocery delivery, increasing order sizes, and a wider product assortment.
Shah noted that Zomato is expected to gain market share through the addition of more supplier restaurants. Growing acceptance of the ‘Zomato Gold’ loyalty program, and increasing consumer preference for online food ordering. The company is also expected to benefit from monetizing its technology platform through platform fees.
Zomato Breaks Out with Strong Momentum, Analysts See Upside Potential to ₹250
Technical analyst Kunal V Parar, VP of technical research and algo at Choice Broking, pointed out that on a weekly chart, Zomato has recently broken out from a rounding bottom formation’s neckline, indicating strong potential for an upward move. This breakout occurred with above-average volume, suggesting further bullish momentum.
On the daily chart, Zomato has been following an upward rising channel formation, reinforcing expectations for continued upward momentum. The stock is trading above all its long-term moving averages, indicating a positive trend and supporting the likelihood of further upward movement. Considering these technical indicators, Parar anticipates significant upside potential for the stock, with a target range of ₹220-250. On the downside, support is expected around ₹165.
Milan Vaishnav, CMT, MSTA, Founder and Technical Analyst of Gemstone Equity Research and ChartWizard FZE, noted that Zomato found resistance in the ₹165-170 zone. This zone turns out to be a classical double top resistance, first tested in November 2021. Following a brief consolidation, the stock staged a breakout and remains in an uptrend.
Vaishnav advised that since the stock is in uncharted territory, the best approach is to stay invested until there are definite signs of reversal. Investors can make new entries and continue to stay invested by trailing the stop loss higher to ₹164.
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