Zomato shares extended the decline for the second consecutive day on Tuesday with the stock hitting a new all-time low 44 each on BSE. Shares of Zomato had hit an all-time low on Monday after the mandatory pre-IPO (initial public offering) of shareholders’ lock-in period ended on July 23.
“Concerns about the Fed tightening and investor focus on cash flow are weighing on Internet names including food tech globally. Zomato is no longer liked by the time of listing last year, and its peers are underperforming. Jefferies 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.
The global brokerage thinks this is a good case for LT (long-term) investors to buy from zomato share and the target value of 100 on stock.
“The Zomato management has also accelerated its journey towards better unit economics and is now eyeing a break-even in the food delivery business in the near future. Adjusted Ebitda Deficit for 4QFY22
Unlike in the past where Zomato intended to invest in multiple businesses, some strategic (tracking an eventual merger) and others as financial investments, the company now intends to conserve cash. The brokerage said that the company does not plan to provide any resources for minority investments, existing or now.
“The only exception to MGMT’s conservative stance is its decision to buy Blinkit, which could be driven by FOMO or protect the food delivery turf highlighted after the acquisition. The time horizon is probably longer for MGMT. As against investors as this business will be cash consuming in the medium term – Zomato has guided for $400m investment over the next two years. This remains a medium-term concern for investors as it will impact the profitability of the company.”
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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