Zomato Share Price: Jefferies highlighted growing competition, concerns about profitability; What should investors do?
Shares of Zomato plunged by as much as 4.8% on Tuesday, dropping to Rs 252.05 on the BSE, after Jefferies downgraded the stock from “buy” to “hold.”
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The revised target price indicates limited upside potential from the stock’s closing price of Rs 264.65 on Monday.
Jefferies highlighted the growing competition in the quick commerce sector, raising concerns about profitability. The brokerage anticipates a period of consolidation for Zomato’s stock, following a remarkable 98.76% return over the past year as part of the Sensex.
The brokerage warned that increased discounting could threaten medium-term profitability, cutting its FY26-27 consolidated EBITDA estimates by 12-15% and halving its target multiple for Blinkit to 6 times.
Elara Securities, in its analysis last week, noted that although many new players have entered the quick commerce space, success will depend on strengthening key areas, expanding use cases, and offering a wider variety at competitive prices. The firm expects Blinkit to maintain its leadership position in the industry due to higher average order value (AOV), larger assortments, and higher take rates, despite recent gains by Swiggy’s Instamart.
Meanwhile, Anand Rathi believes that multiple players can coexist in the quick commerce space. The firm initiated coverage on both Zomato and Swiggy with “Buy” ratings and 12-month target prices of Rs 385 and Rs 705, respectively. It emphasized the entrenched duopoly in the food delivery market, noting Zomato’s leadership in market share and revenue growth, driven by a larger user base. However, Swiggy’s aggressive expansion in quick commerce (QC), including the launch of Bolt (a 10-minute food delivery service), positions it as a strong contender, with improving execution and accelerating growth.
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Anand Rathi also pointed out that 90% of current QC contributions come from the top eight cities, which have higher-income households. However, all players have started expanding to Tier 2 and Tier 3 cities to tap into growth potential and serve value-conscious buyers.
Blinkit has expanded its presence to 45-50 cities in just two years, with 791 stores as of Q2FY25. The company plans to reach 1,000 stores by the end of FY25 and 2,000 by the end of FY26. Swiggy’s Instamart, currently present in approximately 54 cities, aims to reach 75 cities by the end of FY25. The number of dark stores for Instamart increased from 523 in FY24 to 609 in Q2FY25, with a goal of 1,000 dark stores by the end of FY25.
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