Jefferies Predicts a 29% Surge for Zomato Shares: Should You Invest Now?

Zomato’s stock is catching the attention of investors again, with Jefferies giving it a strong ‘buy’ rating and projecting a potential 29% upside. The brokerage firm has set a target price of ₹335, which promises significant gains from its recent close. This development is boosting investor confidence in the food delivery giant, especially as the Indian food services market continues to expand rapidly.

Zomato’s Bright Future: What’s Driving the Growth?

Zomato is positioned as a key player in India’s fast-growing food services industry, with just 20 million active monthly users. Jefferies highlights that there’s still ample room for customer acquisition, which could fuel both revenue growth and market share expansion. The digital shift in commerce and convenience-driven delivery services have made Zomato a hot favorite among consumers. As these trends accelerate, the stock’s growth trajectory looks promising.

Blinkit’s Quick Commerce Leading the Charge

Zomato’s acquisition of Blinkit, a leader in the quick-commerce space, is another growth catalyst. With Blinkit set to see a sharp improvement in profit margins, Zomato is on a path to capitalize on the booming quick-commerce segment. Jefferies expects Zomato’s delivery revenue to grow at a compound annual growth rate (CAGR) of 20% from FY24 to FY27, further enhancing its profitability.

The Bullish Case: A Massive 40% Upside

For investors looking for even bigger gains, Jefferies has a bullish outlook, with a target price of ₹360, which implies a 40% upside. This optimistic scenario is based on a projected 25% CAGR in delivery revenue over the next few years. The company’s efficiency in cost management and an increase in average order values (AOVs) are expected to drive this growth.

What’s the Risk?

While the upside looks promising, Jefferies has also outlined potential downsides. Increased competition from new players, slower-than-expected market expansion, or adverse regulatory changes could impact the stock’s performance. In the worst-case scenario, Jefferies sees the stock dropping to ₹200.

Zomato vs. Nifty: A 2024 Success Story

Zomato’s stock has been on fire this year, surging 108% so far and massively outperforming Nifty’s 16% gain. Over the last 12 months, Zomato’s stock has skyrocketed over 150%, more than doubling investors’ money, while Nifty grew by 28%. The numbers speak for themselves – Zomato is outpacing the market by a wide margin.

Final Thoughts: Should You Buy Zomato Stock Now?

With Jefferies highlighting a mix of growth catalysts like Blinkit’s quick-commerce dominance, improving unit economics, and the overall surge in digital commerce, Zomato’s stock looks well-positioned for further gains. However, potential risks from competition and regulatory changes should not be overlooked.

If you’re looking for a stock with long-term growth potential in India’s booming digital economy, Zomato might just be the one to watch. Keep an eye on how the company continues to scale and whether it can maintain its competitive edge.

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FAQs

1. What is Jefferies’ target price for Zomato?
   • Jefferies has set a base target price of ₹335, with a potential upside of 29%. In a bullish case, they project a target price of ₹360, indicating a 40% upside.
2. What factors are driving Zomato’s growth?
   • Zomato is benefiting from India’s expanding food services industry, growing adoption of digital commerce, and its leadership in quick commerce through Blinkit.
3. What are the risks associated with Zomato stock?
   • Risks include increased competition, slower market growth, and potential regulatory changes affecting platform businesses.
4. How has Zomato performed compared to Nifty?
   • Zomato’s stock has soared 108% this year, significantly outperforming Nifty’s 16% gain. Over the past 12 months, Zomato’s stock has risen by over 150%.

Disclaimer: The information provided in this article is for educational and informational purposes only. It is not intended as investment advice and should not be relied upon for making any financial decisions. Stock market investments are subject to market risks, and past performance is not indicative of future results. Please consult with a licensed financial advisor or conduct your own research before making any investment decisions. The views expressed in this article are based on publicly available information and reflect the opinion of the author at the time of writing.