Zomato Shares Fall 8% Today Despite 64% Year-on-Year Sales Growth – Here’s the Reason Behind the Drop

Zomato Shares

Zomato has shown consistent growth in India’s food delivery and quick grocery sectors, driven by changes in consumer preferences and urbanisation. Platforms such as Zomato and Swiggy dominate the market, offering diverse food options and quick grocery delivery through BlinkIt and Swiggy Instamart.

As the industry expands, innovations such as AI-powered logistics and dark kitchens are increasing efficiency and driving deeper penetration in tier-2 and tier-3 cities.

In its financial performance, Zomato reported a rise in EBITDA from ₹51 crore in December 2023 to ₹162 crore in December 2024, along with an improvement in its operating profit margin from 2% to 3%.

However, net profit was impacted by an increase in depreciation, which rose from ₹128 crore to ₹247 crore due to BlinkIt’s network expansion. This strategic move helped reduce taxable income while also reducing costs and driving long-term growth.

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Zomato’s aggressive expansion of BlinkIt’s quick commerce stores led to increased investment and margin pressure. While BlinkIt’s revenue more than doubled, this resulted in a 14% quarter-on-quarter decline in consolidated adjusted EBITDA to ₹45 crore, reflecting the cost burden of scaling up operations.

Brokerages remain optimistic about Zomato’s prospects despite the mixed performance in the third quarter. Nomura has set a target price of ₹290, suggesting an upside of 30.68% from the CMP of ₹222, reflecting improved profitability in food delivery and a stronger position in quick commerce.

Jefferies with a revised target price of ₹255 noted challenges in quick commerce but acknowledged improved margins in the food delivery segment.

Bernstein is bullish with a target price of ₹310, indicating an upside of 39.64%, citing strong growth potential in instant commerce and Zomato’s aggressive expansion plans. CLSA stands out with the highest target price of ₹400, indicating an upside of 80.18%, anticipating strong growth in BlinkIt’s revenue and EBITDA from FY24 to FY27.

Despite competitive pressures, Zomato’s long-term growth trajectory remains promising, with a focus on scaling operations and increasing profitability.

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