Concerns about the Fed tightening up are weighing heavily on unprofitable internet names globally. The entire sector is undergoing a readjustment as the focus shifts from growth to cash flow. FANGMAN is down 15-65% YTD. This is also affecting the global food delivery stock which is down 50-65% YTD, with Zomato being the worst-performing stock.
Jefferies said in his note on the share of Zomato with High Conviction Buy, ‘The night is darkest just before dawn. 100 per.
“Zomato is no longer liked since the time of listing last year, its peers are underperforming. The Blinkit acquisition paves the way to profitability and, despite management’s guidance on break-even in food delivery, investors aren’t giving much benefit of the doubt. We think this is a good case for buying for LT investors. zomato share“The note stated.
After a sharp correction in the share price of Zomato, the stock is now trading at 0.9x 1Y Forward EV/GMV and 3.5x EV/Revenue. While this is at a premium to global and regional peers, it is justified in the context of a longer growth run-way with higher clear medium-term forecasts on GMV (30% for Zomato versus 10-20% for peers), Highlighted Jefferies.
“We see a steady improvement in profitability in food delivery despite a strong 30% Compound Annual Growth Rate (Cagr) in FY 22-25E (far ahead of global/regional peers),” it added.
The sheen of new-age tech stocks is fading away at a very rapid rate. In the ongoing market correction due to hike in interest rates due to geopolitical crisis and inflation, the share prices of all-new-age fintech startups have come down significantly.
Zomato shares made a great debut on the stock exchanges on July 23, 2021, but since then the stock has lost over 70% of its value due to concerns about valuations and plunging global growth stocks. Investors are also not comfortable with the acquisition of Blinkit (earlier known as Grofers), which Zomato recently acquired 4,447 crore which acts as a catalyst in the downward movement of the food delivery platform as Blinkit is a loss-making start-up.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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