In a dynamic market, Zomato is riding high on Blinkit’s success and favorable analyst sentiments.
After an exceptional 2023, Zomato is gearing up for its Q3 earnings report, and brokerages are buzzing with optimism. Following HSBC’s lead, Goldman Sachs and Jefferies have increased their price targets on Zomato, fueled by the robust growth in its food delivery and quick commerce businesses.
Blinkit’s Ascent in Quick Commerce
Goldman Sachs raised its Zomato price target to INR 160, emphasizing its position as the fastest-growing company in global food delivery and India’s internet space. Notably, Zomato holds a dominant 55% market share in the food delivery sector. The analysts also highlighted Blinkit’s success, now ranking among the top three online grocery platforms in India by gross order value. The brokerage predicts Blinkit’s gross order value to grow at an impressive 45% CAGR between FY24 and FY27, surpassing the industry rate of 34%.
Potential of Online Grocery
Goldman Sachs sees significant potential for Zomato in the online grocery segment, with the total addressable market estimated to be 8-10 times larger than that of food delivery. The positive unit economics achieved by Zomato in online grocery recently is expected to sustain elevated revenue growth for several years.
Competitive Landscape
Analysts at Goldman Sachs pointed out that Zomato’s key competitor, Swiggy, faced trading losses four times higher than Zomato in the first half of 2023. With Swiggy aiming for group-level profitability by CY24, Goldman Sachs expects a benign competitive intensity across both food delivery and quick commerce for Zomato.
The Rise of ‘Affluent India’
A research note titled “The rise of ‘Affluent India'” by Goldman Sachs highlighted Zomato as one of its top ideas, benefiting from the growth of the affluent consumer cohort in India. The report anticipates ‘Affluent India’ to reach about 100 million consumers by 2027, with Zomato positioned as a major beneficiary.
Market Outlook and Price Targets
Jefferies, aligning with the positive sentiment, raised its Zomato price target to INR 190, suggesting a 36.1% upside. The brokerage sees Blinkit as a large opportunity in the quick commerce space, projecting a faster scale-up at 38% CAGR over FY24-28.
Other Broker Opinions:
- HSBC’s Cautious View on Q3 FY24: HSBC Global Research holds a more muted outlook for Zomato’s Q3 FY24, particularly in its food delivery business, anticipating results slightly weaker than Q2. However, the brokerage remains positive on Blinkit’s growth.
- Bullish Momentum Continues: All the mentioned brokerages maintain a ‘buy’ rating on Zomato, reflecting their confidence in the company’s future prospects.
Market Performance:
After touching a new 52-week high at INR 141.55, Zomato’s shares closed about 1% higher at INR 139.6 on the BSE, indicating the continued market enthusiasm surrounding the foodtech major.
In Shorts, Zomato’s growth story, driven by Blinkit’s success, has captivated the market’s attention. As the company prepares to unveil its Q3 earnings, investor optimism remains high, backed by positive broker sentiments and the promising trajectory of the quick commerce business.
