Zomato, one of India’s leading food delivery platforms, has announced its second-quarter results for the financial year ending September 30, 2024. The company reported a staggering 388% surge in net profit, reaching ₹176 crore. While this sharp rise is impressive, it has raised many questions about the company’s stock movement and the future of its market performance. Let’s dive into the key changes and expert insights surrounding Zomato’s stock following its Q2 results.
Zomato’s Impressive Profit Growth in Q2 2024
On October 22, 2024, Zomato revealed that its net profit soared by 388% year-on-year, reaching ₹176 crore. Despite this significant financial improvement, Zomato’s shares faced a downward trend, closing 3.5% lower at ₹256.55 per share on the same day. This comes despite a promising opening in the morning, where shares rose to an intraday high of ₹270.90.
The company’s board also approved a ₹8,500-crore fundraising plan through a Qualified Institutional Placement (QIP), allowing it to further fuel its growth and expansion in the food delivery market. Although this move shows Zomato’s commitment to growth, the market’s reaction has been mixed, reflecting cautious investor sentiment.
Zomato’s Stock Performance and Market Reactions
Despite the positive financial results, Zomato’s stock faced selling pressure after hitting an intraday high. The stock opened with an upside gap, starting at ₹267 per share, and briefly climbed to ₹270.90 before retreating due to profit-booking. Market analysts suggest this dip reflects the broader trend of selling after a high, rather than any underlying weakness in Zomato’s business.
According to experts, Zomato has consistently delivered strong revenue growth and has improved its EBITDA margins. The rise in Zomato’s share price earlier in the day was attributed to the market’s expectation of increased profitability and margin growth.
Zomato’s Revenue and EBITDA Margin Growth
Financial analysts like Mahesh M Ojha, AVP of Research at Hensex Securities, are optimistic about Zomato’s financial performance. He forecasts that Zomato will report a 69% year-on-year (YoY) increase in revenue and a 14% quarter-on-quarter (QoQ) growth. He also predicts a 99 basis point improvement in consolidated EBITDA margins, driven by better execution across various business verticals, particularly in quick commerce.
Zomato Stock Predictions and Expert Advice
For investors keen on Zomato shares, market experts suggest a cautious yet optimistic approach. Sumeet Bagadia, Executive Director at Choice Broking, advises existing shareholders to hold the stock with a stop-loss at ₹240 per share. He also projects a near-term target price of ₹290 to ₹300, suggesting that there’s still room for upward momentum.
For new investors, Bagadia recommends accumulating Zomato shares on dips, maintaining the same stop-loss of ₹240 for short-term gains. Similarly, high-risk traders are advised by Ojha to buy Zomato shares, with an immediate target of ₹285, setting a stop-loss at ₹258 to manage potential downside risks.
Zomato’s Stock Movement: A Comparison with Sensex
While Zomato has shown strong profit growth, its stock performance has been underwhelming compared to the broader market indices. On October 22, 2024, Zomato’s stock fell by 3.24%, underperforming the overall sector by 2%. In contrast, Sensex declined by just 0.75%, showing that the broader market was more resilient than Zomato on that day.
Over the past month, Zomato’s stock has fallen by 11.64%, whereas the Sensex has seen a more moderate decline of 4.73%. This divergence highlights the stock-specific volatility faced by Zomato, even as its fundamental business performance shows improvement.
Long-Term Growth Potential of Zomato
Despite short-term stock fluctuations, Zomato’s long-term prospects remain positive. The company continues to innovate and expand its service offerings, particularly in the fast-growing quick commerce sector. Zomato’s continued investment in technology and customer service positions it as a key player in India’s digital economy.
The company’s fundraising efforts, through the approved ₹8,500 crore QIP, indicate a strong focus on future growth. This capital infusion is expected to support Zomato’s plans for geographical expansion, acquisition, and technology upgrades.
Conclusion: Is Zomato a Good Buy Right Now?
The question on every investor’s mind is whether Zomato’s stock is a good buy at this moment. While the company’s financials show strong growth, the stock’s volatile performance calls for a careful approach. Investors should consider expert advice, monitor market trends, and look for opportunities to buy during dips.
Zomato’s second-quarter results reflect a strong performance in revenue and profit growth. However, market dynamics and short-term pressures have resulted in a mixed reaction to its stock price. Long-term investors can find value in Zomato, especially as the company continues to dominate India’s food delivery market and venture into new areas like quick commerce.
For now, Zomato remains a watchlist candidate for both seasoned and new investors, with future earnings and market conditions dictating the next course of action. Keep an eye on expert guidance, stock market trends, and potential buying opportunities to make the most of this promising stock