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Should You Invest? Zomato Shares Have Increased 26% in Just 5 Days. Analysts Predict Further Gains.



The last five sessions saw an almost 26% increase in Zomato Ltd.'s share price. On May 12, 2022, the shares of the meal delivery business dropped to a lifetime low of Rs 50.05 on the NSE. Zomato share prices, meanwhile, have been steadily soaring northward since they reached their lows. Following the firm management's encouraging post-Q4 results outlook, the price of Zomato stock has increased significantly. The stock increased by almost 48% in the past month as a result of brokerages raising their target price in response to the March quarter earnings.

In comparison to the same period the previous year, Zomato's consolidated net loss increased to Rs 360 crore from Rs 134.2 crore. Operations-related revenue increased from Rs 692.4 crore in the same quarter last year to Rs 1,211.8 crore, a 75.01 percent increase.


According to analysts, Zomato has stated that its capital requirements are minimal and that they have about Rs 12,200 crore in unrestricted cash. In addition, the business stated during commentary that it will reduce operational costs and increase margins in the following quarters. They claimed that the stock has now started to surge northward as the tide has shifted in its favor. However, they argued that existing shareholders should keep holding the shares and that new investors should refrain from opening new positions in the company.

In the final quarter of FY22, Zomato showed remarkable sequential improvements in all key operational and financial parameters. Analysts said that what was even more impressive were the disclosures and management's willingness to respond to public concerns via a shareholder letter and a conference call following the release of the results.


We continue to be optimistic about Zomato's long-term growth prospects in the hyperlocal delivery market because the company is well-positioned to take advantage of strong industry tailwinds like rising millennial and GenZ income shares and improving tech penetration. We continue to have a positive outlook on the company's other investments in the hyper-local ecosystem (beyond just food delivery), as they may result in bundled services that would not only help it increase customer engagement, retention, and ordering frequency but also create operational synergies.


The stock has been under pressure since the beginning of the year and has fallen by about 65% amid a slump in global equities markets and anticipated tightening by central banks throughout the world.


The Jefferies analysts state that although Zomato wants to develop quickly, it is now concentrating on cutting losses to meet long-term shareholder expectations. Loss for 1QFY23 should decrease significantly.


Broking house The stock continues to have an "overweight" rating from Morgan Stanley, with a target price of Rs 135 per share. The stock continues to have a "buy" rating from research company UBS, with a target price of Rs 130 per share.


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