Zomato share price : In a surprising turn of events, Zomato’s share price tumbled by nearly 6% in early trading on Tuesday, despite the company posting a robust financial performance for the fourth quarter of FY24. After a period of sustained losses, Zomato reported a consolidated net profit of ₹175 crore, marking a significant turnaround from a loss of ₹188 crore in the same quarter last year. This represents a 27% increase from the ₹138 crore profit in the December quarter.
Zomato Share Price Drops 6% Post-Q4 Results: Time to Invest?
The food delivery giant also reported a substantial increase in revenue from operations, which surged 73% year-over-year to ₹3,562 crore. The Gross Order Value (GOV) across its B2C businesses for the March quarter rose by 51% year-over-year to ₹13,536 crore.
On the operational front, Zomato achieved an EBITDA of ₹86 crore, a dramatic improvement from the ₹226 crore loss recorded in the corresponding period last year. Additionally, Blinkit, Zomato’s quick commerce arm, reached operational EBITDA break-even in March 2024.
Despite these positive indicators, Zomato’s share price fell to ₹182.10, down by 5.98% on the Bombay Stock Exchange (BSE). This dip has left investors and market analysts pondering over the potential reasons and whether this presents an attractive buying opportunity.
Market Analysts’ Take on Zomato’s Performance and Stock Price
Emkay Global Financial Services praised Zomato for its steady operational results, though noted a margin miss attributed to higher-than-expected Employee Stock Ownership Plan (ESOP) costs. It maintained a ‘Buy’ rating with a target price of ₹230 per share.
Nuvama Institutional Equities highlighted Blinkit’s aggressive expansion plan, which aims to increase its dark store count from 525 in Q4 FY24 to 1000 by the end of FY25. Nuvama maintained a ‘Buy’ rating and raised the target price to ₹245, up from ₹180, driven by Blinkit’s clear leadership and rapid growth in the quick commerce sector.
Elara Capital continues to favor Zomato due to its strong market position in the food delivery sector and Blinkit’s superior execution. Elara upgraded its revenue estimates significantly for FY25 and FY26, driven by Blinkit’s performance, and raised its target price for Zomato shares to ₹280 from ₹250.
Conclusion: Buying Opportunity Amid Market Corrections?
The sharp decline in Zomato’s share price post-Q4 results appears to be influenced by market corrections and potentially unrealized expectations regarding profit margins and ESOP costs. However, with the company’s solid growth metrics and strategic positioning in both food delivery and quick commerce, the current dip might indeed represent a strategic buying opportunity for long-term investors. Market sentiments can often be swayed by short-term fluctuations, but the fundamentals of Zomato suggest a positive outlook.
FAQs on Zomato’s Q4 Results and Share Price Drop
- What was Zomato’s net profit in Q4 FY24?
- Zomato reported a consolidated net profit of ₹175 crore in the fourth quarter of FY24.
- How does this compare to the previous year’s Q4?
- In Q4 FY23, Zomato had a loss of ₹188 crore, making this year’s profit a significant improvement.
- What was the percentage increase in Zomato’s net profit from the previous quarter?
- The net profit grew 27% from ₹138 crore posted in the December quarter.
- What was the revenue from operations for Zomato in Q4 FY24?
- Zomato’s revenue from operations was ₹3,562 crore in Q4 FY24, up 73% YoY.
- What caused the Zomato share price to fall despite positive financial results?
- The share price drop was likely due to market reactions to short-term profitability concerns and higher ESOP costs despite strong results.
- What is the Gross Order Value (GOV) for Zomato in the last quarter?
- The GOV for the March quarter was ₹13,536 crore, a 51% increase YoY.
- How did Zomato’s quick commerce arm, Blinkit, perform in Q4 FY24?
- Blinkit achieved operational EBITDA break-even in March 2024.
- What are analysts saying about Zomato’s future prospects?
- Analysts remain bullish, with some raising target prices, expecting continued growth and market leadership in quick commerce.
- What are the future plans for Blinkit as mentioned by analysts?
- Blinkit plans to increase its dark store count from 525 in Q4FY24 to 1000 by the end of FY25.
- How have the brokerage firms rated Zomato following the Q4 results?
- Brokerage firms like Emkay Global, Nuvama Institutional Equities, and Elara Capital have maintained a ‘Buy’ rating, with various target price adjustments.
- What is the new target price set by Nuvama Institutional Equities for Zomato?
- Nuvama raised the target price for Zomato to ₹245 per share from ₹180.
- Why did Elara Capital raise its target price for Zomato shares?
- Elara raised its target due to upgraded revenue estimates and the strong performance of Blinkit.
- What factors are impacting Zomato’s profitability in the short term?
- Increased ESOP costs and aggressive expansion plans for Blinkit are impacting short-term profitability.
- How are Zomato’s other investments performing?
- The company’s food delivery segment continues to perform well, contributing positively to overall valuations.
- What value do analysts place on Zomato’s food delivery and Blinkit operations?
- Food delivery is valued at around ₹121 per share and Blinkit at ₹93 per share on a DCF basis by some analysts.
- What was Zomato’s EBITDA in Q4 FY24?
- Zomato posted an EBITDA of ₹86 crore, showing an improvement from a loss of ₹226 crore in the same quarter last year.
- What could be the reason for investor skepticism despite the good Q4 results?
- Investor skepticism could be due to concerns over the sustainability of rapid growth and the costs associated with expansion.
- What should potential investors consider before buying Zomato stocks now?
- Investors should consider the company’s growth trajectory, market expansion plans, and the competitive landscape of the quick commerce sector.
- What impact could the expansion of Blinkit have on Zomato’s overall financial health?
- While potentially dilutive to short-term earnings, the expansion could strengthen Zomato’s market position and drive long-term gains.
- Is now a good time to invest in Zomato shares?
- With analysts maintaining a bullish outlook and share price corrections, it could be a strategic opportunity to buy, depending on individual risk tolerance and investment horizon.
Disclaimer:
The information provided in this article is for educational and informational purposes only and should not be construed as financial advice. Potential investors should conduct their own research or consult with a financial advisor before making any investment decisions. The views expressed here are those of the author based on their analysis and market understanding.
