Zomato Shares Rise for Second Consecutive Day After 17% Post-Q3 Slump

resr 5paisa Capital Ltd

Last Updated: 23rd January 2025 - 04:06 pm

1 min read

Zomato Ltd shares continued their upward trajectory for the second consecutive day on January 23, recovering after a sharp 17% decline following the Q3 results announcement on January 20.

As of 11:05 a.m. IST on January 23, Zomato's share price was trading over 2% higher at ₹221.1 per share.

The company’s aggressive expansion of its quick commerce arm, Blinkit, has significantly increased expenses, weighing on its Q3 net profit. Despite the post-earnings dip, brokerages remain optimistic about Zomato’s execution capabilities and long-term growth potential.

Zomato’s net profit for Q3 declined by 57%, primarily due to margin pressures from higher investments in launching new centers to support Blinkit's operations.

Nomura recognizes the intensifying competition in the quick commerce space but expects Blinkit to secure a top-two market position, citing its strong execution and robust financial standing as key advantages.

Jefferies also expresses confidence in Blinkit’s execution but has adjusted its price target for Zomato downward by 7% to ₹255, maintaining a 'hold' rating due to the sharp decline in profitability. The firm believes Zomato’s expansion strategy could push competitors to adopt a similar approach.

Bernstein continues to back Zomato’s expansion efforts, particularly Blinkit's rapid addition of dark stores, and maintains an ‘outperform’ rating with a revised target price of ₹310. The brokerage attributes the recent stock correction to concerns over increasing competition in the quick commerce sector.

Nuvama Institutional Equities shares a positive outlook, emphasizing Blinkit's rapid growth, driven by its expanding dark store network.

For Q3, Zomato reported a 57% drop in consolidated net profit, which fell to ₹59 crore from ₹138 crore in the same period last year, as rising expenditures to scale Blinkit's operations put pressure on margins.

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