“Worldwide brokerage company Jefferies has displaced Zomato(Food delivery aggregator and Quick Commerce hosting provider) stock” from 'buy' to 'hold' and cut its price target by nearly 18% to ₹275. Jefferies took this approach due to concerns over rising competition in the quick commerce industry which can clash Zomato’s prosperity.
2025 new alert for Zomato
Zomato's EBITDA estimates of 12% for the financial year 2026 and 15% for the financial year 2025 have been effectively lowered by Jefferies before Interest, Tax, Depreciation, and Amortisation (EBITDA). Jefferies has settled an 18% cut on Zomato and raised its price target to Rs 275 from Rs 335 earlier. The revised price target appears to be almost on an even keel with Zomato's closing values on Monday. Its shares are also found to be down 13% from their highest ever of Rs 304.
Jefferies has already forecast that offensive strategies by established players and new entrants will lead to increased discounts, which is expected to impact medium-term earnings. And, this reflects skepticism about the positive contribution of the quick commerce business for the foreseeable future.
Zomato shares could see more than double their 2024 stock value in 2025. That's according to Jefferies, who said the stock's valuation is not "overly expensive" in the context of robust execution and opportuneness.
For the rest, Zomato's earnings per share (EPS) estimates have also been cut by Jefferies for the upcoming years by 20% for FY26 and 21% for FY27.
Challenges unlocked for Zomato
As a result, the corporation moved to significantly lower its EBITDA forecasts for Zomato's quick-commerce arm, Blinkit, for FY(Financial year) 2026-27. Moreover, Jefferies has cut in half its target multiple for Blinkit to six times. Even with issues, Zomato's market subsidization has increased by 121% to ₹2.55 lakh crore and its stock has also seen a massive rise of 99%. The company, however, faces fostering competition from challengers such as Swiggy, which has seen significant growth since its launch in the market. There are often high operating costs involved in such services, inclusive of logistics, workforce, and customer acquisition expenses, which may have repercussions on economic performance.
Due to this downgrade on Zomato and the caution of investors, there was a sell-off in its shares. This share price decline of 5% caused significant uneasiness among market participants. It has now become a matter of trouble for Zomato that it is facing challenges for quick commerce because Swiggy's competitors like Instamart and Blinkit─ now owned by Zomato, have also entered the market to compete. In addition, there is also concern that quick delivery requires massive investment, which may give rise to losses if customer volume or order value is inadequate. Shareholders are more dedicated to profitability than growth in tech-driven businesses, so this idea may bother them and invite further challenges.
Now, of the 26 analysts who have coverage on the food delivery aggregator, 23 have a 'buy' recommendation while two others have a 'sell' rating.
Shares of Zomato are trading 4.5% lower at ₹ 253 on Tuesday. This conforms to another 3% downturn on Monday.
With inputs from agencies
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