Zomato Stock Drops 9% After Weak Q3 Financial Results


Last Updated: 21st January 2025 - 11:31 am
On Tuesday, Zomato's stock experienced a sharp decline of over 9% after the company reported weaker-than-expected financial results for the third quarter. The food delivery giant revealed on Monday that its consolidated net profit for the December quarter plunged by 57.2% to ₹59 crore, largely due to margin pressures arising from aggressive store expansions aimed at bolstering its quick-commerce arm, Blinkit. In contrast, Zomato had posted a net profit of ₹138 crore during the same period last year.
At the start of the trading session, Zomato's share price opened at ₹223.10 on the BSE, reaching an intraday peak of ₹227.05 before slipping to a low of ₹219 per share. According to Osho Krishan, Senior Analyst in Technical & Derivatives at Angel One, the stock tumbled nearly 8% following the Q3 earnings announcement.
The decline pushed the stock below its 200-day simple moving average (SMA) on the daily chart, accompanied by the formation of a pronounced bearish candlestick. From a broader technical standpoint, the stock appears to have broken down from a "Double Top" pattern, raising concerns about further corrections in the near term.
The next key support level is seen around the ₹200 range. Conversely, if the stock manages to decisively surpass resistance levels between ₹245 and ₹250, it could negate the current bearish trend and revive bullish investor sentiment. However, unless such a breakout occurs, the stock remains vulnerable to further downside risks, according to Krishan.
Business Performance & Financials
Zomato reported a 2% sequential growth and a 17% year-on-year increase in food delivery, attributing the growth slowdown to weaker demand, as highlighted in its shareholder letter. The company's consolidated revenue from operations surged to ₹5,405 crore, up from ₹3,288 crore in the corresponding quarter of the previous fiscal year. Meanwhile, total expenses escalated to ₹5,533 crore from ₹3,383 crore during the same period in FY23-24.
Brokerage Opinions
Nuvama Institutional Equities
Nuvama's report suggests that Blinkit's rapid dark store expansion is surpassing expectations, fueling faster growth. However, this expansion may temporarily weigh on profitability due to higher initial setup costs.
Despite short-term cost pressures, Nuvama believes profitability will stabilize as these stores mature. The brokerage has retained a 'BUY' rating, albeit with a revised target price of ₹300 (down from ₹325), factoring in FY27 projections.
Motilal Oswal Financial Services
Motilal Oswal views Zomato’s core food delivery business as stable while recognizing Blinkit’s potential to disrupt industries such as retail, grocery, and e-commerce. Using a Discounted Cash Flow (DCF) valuation model with a 12.5% cost of capital assumption, the brokerage maintains a 'BUY' rating with a target price of ₹270, indicating a potential 13% upside.
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