Zomato Share Price Falls 6%: A Comprehensive Analysis

Zomato, one of India’s leading food delivery and restaurant discovery platforms, witnessed a significant drop in its share price on May 14, 2024. The stock plunged by 6% after the company announced its Q4 results. In this article, we will delve deep into the reasons behind the fall, analyze the company’s performance, and present expert opinions on the matter.

Zomato’s Q4 Results: A Mixed Bag

Zomato reported a consolidated net profit of ₹175 crore in the fourth quarter of FY24, marking a significant improvement from the ₹188 crore loss in the same period a year ago. However, the company missed analysts’ expectations on some key metrics, leading to a sell-off in the stock.

According to Emkay Global Financial Services, Zomato’s revenue surpassed their estimates, but the margin miss was attributed to higher-than-expected ESOP (Employee Stock Ownership Plan) costs. Despite the mixed results, Emkay maintains a ‘Buy’ rating on Zomato with a target price of ₹230 per share.

Blinkit: The Game Changer

One of the key highlights of Zomato’s Q4 performance was the strong showing of its quick commerce arm, Blinkit. The company achieved operational EBITDA break-even in March 2024, signaling a significant milestone in its journey towards profitability.

However, Zomato’s management has made it clear that their focus is on expansion rather than immediate profitability. This has led to lower EBITDA for Blinkit, which, in turn, has impacted the overall earnings upgrade for FY25E and FY26E.

Expert Opinions: To Buy or Not to Buy?

Despite the dip in Zomato’s share price, several analysts and experts continue to maintain a bullish outlook on the stock. Here are some of their views:

1. Elara Capital: Maintains ‘Buy’ rating and raises Zomato share price target to ₹280 apiece from ₹250 earlier. The brokerage cites the company’s solid Q4 performance and the potential for long-term growth as reasons for their optimism.
2. Emkay Global Financial Services: As mentioned earlier, Emkay maintains a ‘Buy’ rating on Zomato with a target price of ₹230 per share. The firm believes that the company’s management is bullish on Blinkit and aims to maintain its adjusted EBITDA close to break-even levels over the next few quarters.
3. Mint: Advises investors to consider the dip in Zomato’s share price as an opportunity to buy the stock. The publication cites the company’s strong Q4 results and the potential for future growth as reasons for their positive outlook.

Conclusion: A Long-term Play

While the 6% fall in Zomato’s share price may have spooked some investors, it is essential to look at the bigger picture. The company’s Q4 results, though mixed, showcase a steady improvement in its overall performance. Moreover, the strong showing of Blinkit indicates that Zomato is well-positioned to capitalize on the growing demand for quick commerce in India.

As with any investment, it is crucial to conduct thorough research and seek professional advice before making a decision. However, based on the expert opinions and the company’s performance, Zomato’s share price fall could present an attractive buying opportunity for long-term investors.

Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the author. This article is for informational purposes only and should not be considered as investment advice. Please consult a financial advisor before making any investment decisions.