New-age internet stocks have been a topic of intense discussion among investors, especially after a period of significant volatility following their IPOs. Companies like Zomato, Nykaa, and PolicyBazaar have experienced fluctuations in their stock prices, leaving investors wondering whether to hold, buy more, or exit these positions.
Several new-age internet stocks have seen a strong recovery over the past year, with Zomato leading the charge. The food delivery giant has surged nearly 189 percent over the last 12 months, with a 109 percent gain so far in 2024. Zomato’s momentum continued in August, climbing nearly 13 percent and marking its third consecutive month of gains. The stock hit a record high of ₹280 last week and is currently trading at ₹259.40, up a remarkable 188 percent from its 52-week low of ₹90.08, reached in August last year.
PB Fintech, the parent company of PolicyBazaar, has also delivered exceptional returns, soaring 124 percent in the last year and nearly 128 percent year-to-date. The stock has jumped over 24 percent in August alone, continuing its upward streak for the fifth straight month. PB Fintech recently reached a record high of ₹1,849 in intraday trading, marking a 180 percent increase from its 52-week low of ₹661.25, set in October last year.
CarTrade Tech has seen a more moderate rise, gaining 75 percent in the last year and 23 percent in 2024 year-to-date. After a dip in June, the stock rebounded, climbing 1 percent in August following an 11.3 percent gain in July. CarTrade Tech hit its 52-week high of ₹974 in May this year, and despite its current price of ₹874.65, it remains 10 percent below that peak but has rallied 71.5 percent from its year low.
Fsn E-Commerce Ventures, known as Nykaa, has posted a 67 percent gain over the last year and nearly 27 percent in 2024 year-to-date. The stock has risen more than 14 percent in August, extending its gains for the third consecutive month. Nykaa reached its 52-week high of ₹229.90 last week and is currently trading at ₹219.70, up 67 percent from its 52-week low of ₹131.70 set last August.
Honasa Consumer (Mamaearth) has not completed its one year yet but has advanced almost 15 percent in 2024 YTD. It has gained 9 percent in August so far after a 7.5 percent rise in July. The stock also hit its 52-week high of ₹537.85 in intra-day deals today. It has now surged 110 percent from its 52-week low of ₹256.10, hit in November last year.
However, not all stocks in the sector have performed as well. One 97 Communications (Paytm) has faced significant challenges, dropping more than 38 percent over the past year and 16 percent in 2024 year-to-date. Although Paytm has shown signs of recovery, with gains over the last three months, it remains well below its October 2023 high of ₹998.30. Currently trading at ₹531, the stock is still 47 percent below its year high but has rebounded 71 percent from its 52-week low of ₹310, reached in May this year.
Delhivery has had a muted performance, rising just 3.5 percent over the past year and adding around 11 percent in 2024 year-to-date. The stock has been volatile this year, recovering by nearly 4 percent in August after a 14.2 percent decline in July. Delhivery hit its 52-week high of ₹488.05 in February 2024 and is currently trading at ₹430.75, about 12 percent below that peak but 21.5 percent above its year low of ₹354.50, recorded in December 2023.
Easy Trip Planners has also had a subdued year, with a modest 2 percent gain over the last 12 months and a nearly flat performance in 2024. The stock is down 2 percent in August following a slight 0.3 percent increase in July. It hit its 52-week high of ₹54 in February 2024 and is now trading at ₹40.46, which is 25 percent below its year high but over 9 percent above its 52-week low of ₹37.01, set in October 2023.
New age companies have fully realized that ultimately, they will have to show a path towards profitability if they are to survive, thrive and grow as investors and venture capitalist funds will not forever continue to sustain them. And so, with the recent trend of focus of such companies towards turning into the black, investors appear to have taken a liking for such stocks and many of such stocks, the likes of Zomato, Paytm, Nykaa, Delhivery, to name a few, have generated spectacular returns for their investors. However going forward, investors shall closely scrutinize the earnings reports of such companies and their future plans as well. So, it is definitely not going to be easy for them, but at the same time, will offer immense opportunities for such companies which are able to sustain their growth rate, manage their cost and consistently churn out profits, as this sector holds immense opportunity in years to come. Amongst the top picks, one can look at Zomato, Policybazaar from a long-term perspective and should adopt an SIP mode as that bodes well, given the current market conditions.
New age companies have changed their strategy and now the focus is more on cash profit and/or net profit versus the earlier focus on topline. Their latest commentaries bear this out. This is also reflected from the results of some of the new age companies. Given the limited free float of these companies and the fact that most investors - both pre IPO and post - may not be willing to sell at prices below their acquisition costs, traders have found these companies worthy of buying off late. The fact that some brokerages have upped their outlook and targets on such companies has also helped.
New-age companies in India, such as Zomato, Nykaa, and PolicyBazaar, have shown improvement after a challenging start post-IPO due to several factors. Enhanced financial performance, including increased revenues and reduced cash burn, has boosted investor confidence. The expanding digital economy and strategic moves—like Nykaa’s foray into physical retail and Zomato’s B2B expansion—have strengthened their market positions. The initial post-IPO market correction allowed for more accurate valuations, and increased institutional investment have further stabilized stock prices. This combination of improved performance, strategic growth, and favorable market conditions has led to a positive outlook for these companies.
Traders might consider accumulating Nykaa and PolicyBazaar on dips, with stop-loss levels set at 190 and 1500, respectively. Nykaa is expected to gradually move towards 230 and potentially reach 250, while PolicyBazaar could test the 2000+ zone in the coming weeks.
A majority of new-age companies reported stellar results in the June quarter. On average, companies like Zomato, CarTrade Tech, PB Fintech, FSN E-Commerce Ventures, Easy Trip Planners, Honasa Consumer and Delhivery saw 30 percent YoY revenue growth.
However, most of them were loss-making around the time of their listing. Though a few of them are profitable currently, we see that their profits aren’t substantial. This brings down their earnings per share (EPS), which inturn makes them look expensive in terms of their PE ratio.
One should understand that the products and services that these businesses provide have an appeal in bigger cities in India, however, there is a huge base that remains untapped. An increase in market penetration and consolidation in their respective spaces, may lead to an increase in revenues and profits and that might eventually reflect in their stock price.
Technically, most of these stocks are currently trading above their 50 Day Exponential Moving Averages (50 DEMA), which signifies they are in a medium term upward trend. Last 3 months returns from these stocks range in 15-40 percent, so investors should also check if the new money coming in the stocks is from long term focused investors or short term traders.
The outlook for new-age internet stocks is cautiously optimistic, with experts highlighting the importance of profitability, strategic growth, and market penetration. While the sector presents challenges, it also offers significant opportunities for investors willing to navigate the complexities of this evolving market. Top picks like Zomato, Nykaa, and PolicyBazaar are recommended for those with a long-term perspective, but careful consideration of market conditions and company fundamentals is essential before making investment decisions.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
