Zomato share price surges 12%; stock’s mcap jumps by 25k in a day; is it still a buy after Q1 result?

Zomato share price surged 19 per cent in morning trade on Friday, August 2, to hit a fresh all-time high of ₹278.45, a day after the company reported its April-June quarter (Q1FY25) results. The stock opened 5 per cent higher at ₹244 apiece on the BSE. The stock closed 12.11 per cent higher at ₹262.45 apiece.

The sharp increase in the stock's value boosted its market capitalisation on the BSE from ₹2,06,640 crore in the previous session to ₹2,31,664 crore on Friday, reflecting a remarkable one-day rise of nearly ₹25,000 crore.

As Mint reported earlier, Zomato’s consolidated net profit for Q1FY25 soared to ₹253 crore from ₹2 crore in the same quarter a year ago, driven by higher gross order value across its food delivery, quick commerce and going-out verticals.

Consolidated revenue for the quarter under review came at ₹4,442 crore compared to ₹2,597 crore a year earlier.

After the result announcement, the stock closed 2 per cent higher at ₹234.10 on Thursday, August 1.

Zomato share price surged by an impressive 202 per cent over the past year. Despite such sharp gains, most brokerage firms believe the stock remains buy-worthy due to the company's strong growth and profitability prospects. 

Brokerages bullish after strong Q1 show

Several brokerages expressed positive views on the stock and raised their target prices after the company reported a better-than-expected Q1 scorecard.

Brokerage firm Nuvama Wealth maintained a buy call on the stock and raised the target price to ₹285 from ₹245 earlier. Nuvama pointed out that Zomato continues to deliver on its promise of strong growth and improved profitability.

"The company once again delivered better-than-expected performance on all counts. Management guided for 20 per cent-plus growth in the short term in Food delivery and set a target to increase Blinkit’s dark store count from 639 in Q1FY25 to 2,000 by end-CY26," Nuvama pointed out.

Brokerage firm Motilal Oswal Financial Services also maintained a buy call on the stock with a target price of ₹300, implying a 28 per cent upside potential.

Motilal said Zomato's food delivery business is stable, and Blinkit offers a generational opportunity to participate in the disruption of industries such as retail, grocery and e-commerce.

Kotak Institutional Equities, too, maintained a buy call on the stock and revised the SoTP-based fair value to ₹270 from ₹225 earlier.

Kotak upgraded Zomato's FY25-27 revenue estimates by nearly 4-5 per cent, due to higher food delivery and Blinkit revenues, while it cut EPS (earnings per share)estimates by 7-9 per cent due to lower Blinkit near-term profitability.

"We like the company for sharp execution across verticals. Stable food delivery growth and margins prompt a lower WACC (weighted average cost of capital) assumption of 12.5 per cent," said Kotak.

While the stock remains an attractive buy for the long term, some technical analysts point out that the stock has seen sharp gains in the recent past, which has pushed it into the overbought zone. So, some profit booking at this juncture could be considered.

Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers, pointed out that in the past two months, Zomato stock experienced a significant surge, pushing it well above all major key moving averages, including the 21-day, 50-day, 100-day, and 200-day exponential moving averages (DEMA).

Patel underscored that trading significantly above these levels indicates that the stock may be overextended and potentially prone to a pullback. In such scenarios, there is a heightened risk of a price correction as investors may begin to take profits, leading to selling pressure.

"We advise against initiating new long positions in the stock at this elevated level. For those who have already invested, it would be prudent to consider booking profits to lock in gains, as the current overbought condition suggests a possible decline in the stock price in the near term," said Patel.

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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.