Zomato Reports Profit in Q2 Amid Positive Analyst Predictions

Zomato share price witnessed a remarkable 14% surge during Friday’s trading session, reaching a new 52-week high, following the release of its robust June quarter results. Several leading analysts have expressed optimism about the stock predicting further growth. Jefferies targets Rs 130, JM Financial sees it at Rs 115, while Motilal Oswal Securities and Nuvama Institutional Equities find the stock worth Rs 110.

Strong Q2 Results Propel Zomato to Profitability

Zomato’s food delivery platform reported a significant profit after tax (PAT) of Rs 2 crore for the quarter, marking a major turnaround from the net loss of Rs 186 crore during the same period last year. JM Financial has noted that Zomato shares have surged by 35% since the March quarter results and expects the momentum to continue. The market is currently reflecting the value of the food delivery business, but there is potential for significant value unlocking in Blinkit.

Positive Outlook for Zomato Share Price Future Growth

Driven by a sharp 11% sequential increase in food delivery Gross Order Value (GOV), Zomato’s management has provided optimistic guidance of over 40% adjusted revenue growth in both FY24 and FY25. The company is determined to achieve EBITDA profitability in the next few quarters. Zomato aims to achieve adjusted EBITDA profitability in all three business segments by FY25.

Analysts Remain Bullish on Zomato

Motilal Oswal Securities projects Zomato to achieve positive reported EBITDA by the March quarter and estimates a 5% EBITDA margin for FY25. The valuation is based on a DCF methodology, assuming a 4% terminal growth rate and 12.5% cost of capital. They maintain a Buy rating with a target of Rs 110, implying a potential 28% upside. Jefferies is even more bullish, valuing the stock at Rs 130.

Nomura India Highlights Seasonal Factors in Zomato’s Growth

Nomura India attributes part of Zomato’s growth to seasonal factors such as the summer holiday season for schools and the IPL cricket tournament. Monthly transacting users (MTUs) rose by 5.4% QoQ to 1.75 crore users, driven by the marketing push of Zomato Gold. Nomura factors in stronger growth and margin estimates for the core Food Delivery and Q-commerce businesses over FY24 and FY25. However, long-term adjusted EBITDA margin estimates remain at 5.1% of GOV.

Nuvama Anticipates FCF Generation with Profitability Milestone

Nuvama expresses confidence in Zomato’s ability to sustain high GOV growth and strong CM improvement in the core Food Delivery business. The management’s guidance of more than 40% YoY growth in adjusted revenue for the next two years bolsters this confidence. With the company achieving its first profitability milestone, the focus now shifts to Free Cash Flow (FCF) generation. Nuvama suggests a target of Rs 110 for the stock.

In Conclusion:
Zomato share price have reached an all time high thanks to an outstanding Q2 performance and a promising outlook for future growth. Analysts are optimistic about the stock with several firms predicting impressive targets. The company’s focus on profitability and expansion in its different business segments has received a warm reception from investors.
As Zomato continues to make strides in the food delivery industry investors eagerly anticipate the realization of its potential and the generation of sustainable free cash flow.