Zomato Share Price : Is Zomato Stock Still a Buy After Q1 Results? Analyzing the 170% Surge and Future Prospects
Zomato Share Price , the Indian food delivery giant, has been on an incredible ride over the past year, witnessing a staggering 170% surge in its stock price. As the company reported its Q1FY25 results, the market responded with great enthusiasm, driving the stock to new highs. But with such impressive gains, many investors are left wondering: is Zomato stock still a buy? Let’s dive deep into Zomato’s financial performance, market position, and future prospects to answer this pressing question.
Zomato’s Q1FY25 Financial Performance
Stellar Revenue and Profit Growth
In its Q1FY25 financial report, Zomato delivered a standout performance. The company’s consolidated net profit soared to ₹253 crore, a dramatic increase from the ₹2 crore reported in the same quarter a year ago. This growth was driven by higher gross order value across its food delivery, quick commerce, and going-out verticals.
Surge in Revenue
Zomato’s consolidated revenue for the quarter under review stood at ₹4,442 crore, up from ₹2,597 crore a year earlier. This remarkable increase highlights the company’s strong market presence and its ability to attract and retain customers.
Market Reaction and Stock Performance
Stock Surge Post-Results
Following the announcement of its Q1 results, Zomato’s stock surged by 11.5% in morning trade on August 2, hitting a fresh all-time high of ₹261. The stock opened 5% higher at ₹244 apiece on the BSE and closed 2% higher at ₹234.10 on August 1. Such a surge indicates strong investor confidence in the company’s future prospects.
Brokerage Firms’ Positive Outlook
Several brokerage firms have expressed bullish views on Zomato’s stock, raising their target prices after the impressive Q1 performance. For instance, Nuvama Wealth increased its target price to ₹285 from ₹245, citing Zomato’s strong growth and improved profitability.
Brokerage Insights: Why Zomato is a Buy
Nuvama Wealth
Nuvama Wealth maintained a buy call on Zomato and raised its target price, pointing out that the company continues to deliver on its promise of strong growth and improved profitability. They highlighted management’s guidance for 20%+ growth in the short term in food delivery and plans to increase Blinkit’s dark store count significantly.
Motilal Oswal Financial Services
Motilal Oswal also maintained a buy call with a target price of ₹300, indicating a 28% upside potential. They emphasized that Zomato’s food delivery business is stable and Blinkit offers a generational opportunity in the disruption of retail, grocery, and e-commerce industries.
Morgan Stanley
Morgan Stanley retained its “overweight” rating on Zomato, revising the price target to ₹278 from ₹235. They believe Zomato’s aspiration for 20%+ growth in food delivery and expansion plans for Blinkit indicate robust revenue growth momentum.
Nomura
Nomura raised its price target to ₹280 from ₹225, maintaining a “buy” recommendation. They noted Zomato’s high growth path and improving profitability, seeing significant room for growth in both food delivery and quick commerce businesses.
Key Growth Drivers
Expansion of Blinkit
Blinkit, Zomato’s quick commerce vertical, is a major growth driver. The company plans to increase Blinkit’s dark store count from 639 in Q1FY25 to 2,000 by the end of CY26. This expansion aims to capture a larger market share in the rapid delivery segment.
Launch of New App for “Going Out” Segment
Zomato’s new app targeting the “going out” segment is expected to drive additional revenue growth. This app aims to enhance the customer experience by providing seamless solutions for dining out, making reservations, and exploring dining options.
Strong Customer Base and Market Penetration
Zomato’s strong customer base and deep market penetration continue to be significant assets. The company’s ability to attract and retain customers through innovative offerings and reliable service keeps it ahead of the competition.
Challenges and Risks
Profitability Concerns
While Zomato’s revenue and order volumes are impressive, maintaining profitability in the face of rapid expansion and competition remains a challenge. The company needs to balance growth with sustainable profit margins.
Intense Competition
The food delivery and quick commerce sectors are highly competitive, with players like Swiggy, Amazon, and Dunzo vying for market share. Zomato must continue to innovate and provide superior service to stay ahead.
Regulatory and Operational Risks
Zomato operates in a dynamic regulatory environment that can impact its operations. Additionally, logistical and operational challenges in expanding Blinkit’s dark stores and ensuring timely deliveries could pose risks.
Future Outlook: Is Zomato Still a Buy?
Strong Growth Prospects
Despite the challenges, Zomato’s strong growth prospects make it an attractive investment. The company’s aggressive expansion plans, coupled with robust financial performance, indicate a promising future.
Positive Brokerage Ratings
The overwhelming majority of brokerage firms maintain a “buy” rating on Zomato, with many raising their price targets. This consensus reflects strong market confidence in Zomato’s growth potential and strategic direction.
Investor Sentiment
Investor sentiment remains positive, as evidenced by the stock’s impressive performance and the reaction to the Q1FY25 results. The stock’s ability to buck the trend in an otherwise weak market further underscores its attractiveness.
Conclusion
Zomato Share Price : Zomato’s journey over the past year has been nothing short of extraordinary. The company’s strong financial performance, aggressive expansion plans, and positive market sentiment make it a compelling investment. While challenges remain, the overall outlook for Zomato is bullish, with significant growth potential in both the food delivery and quick commerce sectors. For investors seeking exposure to a dynamic and rapidly growing company, Zomato remains a buy.
Read more: From Railway Clerk to Olympic Hero: The Inspiring Journey of Swapnil Kusale
FAQs
1. What drove Zomato’s impressive Q1FY25 performance?
Zomato’s Q1FY25 performance was driven by higher gross order value across its food delivery, quick commerce, and going-out verticals, resulting in significant revenue and profit growth.
2. How has the market reacted to Zomato’s Q1FY25 results?
The market reacted positively, with Zomato’s stock surging 11.5% post-results and several brokerage firms raising their target prices, indicating strong investor confidence.
3. What are the key growth drivers for Zomato?
Key growth drivers for Zomato include the expansion of Blinkit’s dark store network, the launch of a new app for the “going out” segment, and a strong customer base with deep market penetration.
4. What challenges does Zomato face?
Zomato faces challenges such as maintaining profitability amidst rapid expansion, intense competition from other players, and navigating regulatory and operational risks.
5. Is Zomato stock still a buy after its recent surge?
Yes, despite the recent surge, Zomato’s strong growth prospects, positive brokerage ratings, and robust financial performance make it an attractive investment.
