Zomato shares hit all-time low! What should investors do now?

Shares of food aggregator Zomato crashed 8 per cent to hit an all-time low of Rs 75.75 on BSE. The stock has been falling for the last three trading sessions and has plunged over 17.5 per cent in the period.
 
Zomato made a bumper debut on bourses with the unicorn hitting the Rs 1-lakh crore market capitalisation mark. The stock opened at Rs 116, 52.63 per cent higher on NSE against the issue price of Rs 76. It slipped below its issue price today. The market cap of the firm fell to Rs 61,401.08 crore.
 
Shares of Zomato hit an all-time high of Rs 169.10 on November 16, 2021. Currently, the stock is trading over 55 per cent below its all-time high.
 
Zomato reported weaker than expected results for the quarter ended December 2021. The company reported a narrowing of consolidated net loss at Rs 63 crore for the quarter ending December 31, 2021. The firm had posted a net loss of Rs 352.6 crore in the year-ago period and Rs 429 crore in the previous September quarter.
 
Revenue from operations came in at Rs 1,112 crore, up 82.47 per cent against Rs 609.4 crore in the year-ago quarter. The Deepinder Goyal-led company also declared a consolidated exceptional gain of Rs 316 crore in the December quarter.
 
"Zomato is taking a very strategic and long-term approach to build its business. Therefore, the short-term investors will feel disappointed by the recent operating performance. At the same time, it is an interesting entry opportunity if they believe that all the organic and inorganic growth initiatives by Zomato are in the right direction," Abhay Agarwal, Founder, and Fund Manager, Piper Serica told BusinessToday.In.
 
"We believe that a business like Zomato, which is a long-term play on the fast growing out-of-home food consumption market, should be considered for its long-term value creation by long term investors. With its clear market leadership, strong balance sheet and focus on profitability we believe that it will reward long-term investors handsomely," he added.
 
However, the brokerage house Dolat Capital noted that the declining contribution with weak growth in Gross Order Value (GOV), suggests that the growth is getting softer while cost pressures are not moderating. This, along with a further allocation of Rs 550 crore on minority investments, is straining cash-flows.
 
"Given the persistent losses in the past and expected continuation of the cash burn in near future we believe the company can compound its revenues by 10x over a decade but with modest profitability and cash generation and thus believe DCF valuation as an ideal tool to value real long-term potential," it said.
 
"We have currently factored in Revenue CAGR of 27.4 per cent over FY22-25E & 20.5 per cent over FY26-30E in its hyper-growth stage with exit EBIT Margin of 22.1 per cent in FY30e, Cost of Capital of 10.5 per cent and terminal growth rate of 6 per cent. The average EBIT Margin stood at -30.9 per cent and 7.4 per cent over FY22-25E & FY25-30E respectively. Taking these assumptions, we have arrived at DCF based target price of Rs 75 per share (earlier Rs.90) and maintain our 'Sell' rating on the stock," the brokerage house added.