Zomato shares tank 5% following Macquarie's downbeat forecast
Zomato, a leading food delivery platform in India, experienced a more than 5% drop in its share price on Friday. This decrease was triggered by a forecast from brokerage firm Macquarie, which predicted an almost 50% decline in Zomato's share price within the next year due to growing competition in the quick commerce sector. At the time of writing, Zomato's shares had recovered from their intraday lows to trade at ₹177.70 each on the NSE, down 1.4%.
Macquarie maintains 'underperform' stance on Zomato
Macquarie has maintained its "underperform" rating on Zomato, setting a price target of ₹96 for the company's stock. This suggests a potential downside of 46% from the closing price on the previous day. Macquarie has consistently rated Zomato as 'underperform' since May last year when it downgraded it from its earlier 'neutral' rating. In Macquarie's terms, an 'underperform' rating is equivalent to a 'sell' call.
JioMart's expansion plans add to Zomato's competitive pressure
Macquarie analysts have identified increasing competitive pressure as the main reason for their caution toward Zomato. They specifically highlighted JioMart's plans to launch 30-minute grocery delivery services in multiple cities starting next month. Owned by Reliance Industries, JioMart intends to initially roll out this service in eight cities before expanding it to the top 20-30 cities nationwide during phase one.
Macquarie questions forecasts and margins for Zomato's Blinkit
Macquarie expressed doubts about both consensus forecasts and margins for Blinkit, Zomato's quick commerce arm. This skepticism contrasts with Goldman Sachs's recent valuation that assigned Blinkit a higher multiple than Zomato's main food delivery business. Despite this, Blinkit reported positive EBIT in the March quarter of FY24 and saw its revenue more than double year-on-year to ₹769 crore.
