On Wednesday, January 22, Zomato's share price fell 5% in morning trading on the BSE for the third straight session.
On Wednesday, January 22, Zomato's share price fell 5% in morning trading on the BSE for the third straight session. Zomato's stock fell 5.1% to ₹203.80 after opening at ₹207.40, down from its previous closing of ₹214.65. In light of this price, the stock has plummeted 18% over the last three days, including today.What is causing the share price of Zomato to decline?
Since the release of its December quarter (Q3) data, the stock of the new-age tech company has been declining. The company announced on January 20 that its net profit for Q3FY25 was ₹59 crore, down 57.3 percent from ₹138 crore during the same period the previous year.
In Q3, Zomato's operating revenue increased 64.4% to ₹5,405 crore from ₹3,288 crore in the same quarter last year. In the reviewed quarter, the gross order value (GOV) of its business-to-consumer (B2C) operations (quick commerce, food delivery, and going-out) increased by 57% to ₹20,206 crore.
The main source of disappointment was the margin front, which resulted from the store's swift expansion to handle orders via its Blinkit quick-commerce service. In contrast to a positive EBITDA of ₹48 crore during the same time last year, Blinkit reported an EBITDA loss of ₹30 crore. In contrast, Zomato's EBITDA increased to ₹162 crore from ₹51 crore at the same time last year.
Will Zomato stock continue to suffer?
Despite poor Q3 results, analysts seem optimistic about the stock's long-term prospects. They think that Blinkit's expansion plans will hurt the company in the short term but benefit the stock and company in the long run.
In addition to surpassing the 1,000-store milestone in Q3, brokerage firm JM Financial, which has a buy call on the company with a target price of ₹280, also accelerated plans to meet the 2,000-store target by December 2025, ahead of the previous projection of December 2026.
"While this strategy could aggravate Blinkit’s absolute losses as well as capex in the near term, it should help it sustain GOV growth of more than 100 per cent year-on-year in FY25 and FY26, and thus maintain market leadership," stated JM Financial.
"We predict that if store expansion slows down in the second half of FY26, Blinkit's profitability might also experience a significant improvement. JM Financial stated, "We strongly advise long-term investors to take advantage of the opportunity to build sizable positions, even though short-term uncertainties in Blinkit's profitability trend may cause pressures in the stock."
Brokerage Additionally, Blinkit dark store additions surpass forecasts and accelerate expansion, according to Nuvama Wealth Management. Higher upfront costs for store openings could cause short-term delays in profitability.
A buy call on Nuvama's shares is likewise in effect, with a target price of ₹300. According to the brokerage firm, "as these stores mature, the bunching up of costs for dark store addition will eventually lead to a bunching up of profitability in future quarters, but shall hurt profitability in the short term."
Which technical indicators indicate Zomato shares?
Over the past year, the stock has seen an astounding rise of more than 50%. However, it seems to be in a bearish pattern following the results of the December quarter.
Zomato has displayed a bearish technical setting on the daily chart, exhibiting a double-top pattern breakdown with lower highs and lower lows, according to Choice Broking equities research analyst Mandar Bhojane. If the bearish trend persists, the double-top pattern suggests additional weakening with downside objectives of ₹190 and ₹180.
Bhojane pointed out that the stock price is below the 20th, 50th, 100th, and 200th major exponential moving averages, confirming the current negative trend. The stock is oversold, but there are no indications of a reversal, according to the Relative Strength Index (RSI), which is now drifting lower at 27.77. In the short run, these technical indications support traders' and investors' cautious posture.
"Zomato has to maintain a robust breakout above ₹220 and ₹240 with substantial volume and distinct reversal patterns in order to have a bullish perspective. Until then, bearish sentiment is still prevalent and the stock is still under pressure. In the absence of a rebound signal, investors should concentrate on keeping a close eye on these levels while being ready for any declines, Bhojane advised.
The main source of disappointment was the margin front, which resulted from the store's swift expansion to handle orders via its Blinkit quick-commerce service. In contrast to a positive EBITDA of ₹48 crore during the same time last year, Blinkit reported an EBITDA loss of ₹30 crore. In contrast, Zomato's EBITDA increased to ₹162 crore from ₹51 crore at the same time last year.
Will Zomato stock continue to suffer?
Despite poor Q3 results, analysts seem optimistic about the stock's long-term prospects. They think that Blinkit's expansion plans will hurt the company in the short term but benefit the stock and company in the long run.
In addition to surpassing the 1,000-store milestone in Q3, brokerage firm JM Financial, which has a buy call on the company with a target price of ₹280, also accelerated plans to meet the 2,000-store target by December 2025, ahead of the previous projection of December 2026.
"While this strategy could aggravate Blinkit’s absolute losses as well as capex in the near term, it should help it sustain GOV growth of more than 100 per cent year-on-year in FY25 and FY26, and thus maintain market leadership," stated JM Financial.
"We predict that if store expansion slows down in the second half of FY26, Blinkit's profitability might also experience a significant improvement. JM Financial stated, "We strongly advise long-term investors to take advantage of the opportunity to build sizable positions, even though short-term uncertainties in Blinkit's profitability trend may cause pressures in the stock."
Brokerage Additionally, Blinkit dark store additions surpass forecasts and accelerate expansion, according to Nuvama Wealth Management. Higher upfront costs for store openings could cause short-term delays in profitability.
A buy call on Nuvama's shares is likewise in effect, with a target price of ₹300. According to the brokerage firm, "as these stores mature, the bunching up of costs for dark store addition will eventually lead to a bunching up of profitability in future quarters, but shall hurt profitability in the short term."
Which technical indicators indicate Zomato shares?
Over the past year, the stock has seen an astounding rise of more than 50%. However, it seems to be in a bearish pattern following the results of the December quarter.
Zomato has displayed a bearish technical setting on the daily chart, exhibiting a double-top pattern breakdown with lower highs and lower lows, according to Choice Broking equities research analyst Mandar Bhojane. If the bearish trend persists, the double-top pattern suggests additional weakening with downside objectives of ₹190 and ₹180.
Bhojane pointed out that the stock price is below the 20th, 50th, 100th, and 200th major exponential moving averages, confirming the current negative trend. The stock is oversold, but there are no indications of a reversal, according to the Relative Strength Index (RSI), which is now drifting lower at 27.77. In the short run, these technical indications support traders' and investors' cautious posture.
"Zomato has to maintain a robust breakout above ₹220 and ₹240 with substantial volume and distinct reversal patterns in order to have a bullish perspective. Until then, bearish sentiment is still prevalent and the stock is still under pressure. In the absence of a rebound signal, investors should concentrate on keeping a close eye on these levels while being ready for any declines, Bhojane advised.
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