Zomato’s share price has declined 30% year-on-year, compared to a fall of over 1% in the Nifty. According to JPMorgan this sharp correction provides an opportunity to reassess its view on the stock. it sees zomato Contrary to its strong performance as a compelling after recent improvement and has upgraded the rating from underweight to overweight.
“We have turned more creative, as our alt-data analysis of its restaurant network and channel checks shows that Zomato’s medium-term profitability is likely to be better than we thought. Zomato is vulnerable to premium supply reversal while discounts are less broad than peers,” said analysts at JP Morgan, who have a price target (March-23), in a note. On stock 13.
JPM has upgraded Zomato stock to overweight for four reasons – it expects Average Order Value (AOV) to be sustainable in the medium term as it has lower ratio of premium restaurants, Zomato sees reduction in discounts because Discounts rapidly become merchant funded. Increasing platform power, sustainable AOV as well as reducing discounts should lead to higher contribution margins.
It sees strong long-term growth going forward and with some increase in frequency among existing groups, Zomato retains its current segment of the food delivery industry with the opportunity to build an accelerated grocery practice that can expand its TAM. Is.
JPMorgan takes a more creative approach to potential synergies from Blinkit (Grofers) as its download/engagement and retention figures increasingly beat its peers.
“Blinkit seems to have broken out of competition on the instant grocery (~10 minute) delivery model. Its audience is now convenience-based with higher synergies with Zomato to be more monetizable. While unit economics should evolve, <30 The minute delivery model is likely to gain share in the half-day model in Metro/Tier 1 cities; it may accelerate the Blinkit/Zomato merger," the note added.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
Never miss a story! Stay connected and informed with Mint.
download
Our App Now!!
,