In the past two months, the shares of Zomato Ltd have witnessed a remarkable surge, leading to a fresh one-year high. With an impressive gain of nearly 53%, the stock is now trading above its initial issue price of INR 76 per share. Investors are showing increased confidence in the company’s prospects, driving its stock price to new heights.
After hitting a low of approximately INR 50 per share in March 2023 or FY23, Zomato shares have been on an upward trajectory, consistently reaching new 52-week highs. The stock has sustained its uptrend since then, demonstrating positive momentum in the market.
Reaching a price of INR 77.35 per share, the stock achieved a level that had not been seen since April 26, 2022. As of 1pm, the stock was trading at INR 77 on the BSE, representing a 1.64% increase from its previous close. Since March, the stock has gained an impressive 53%. However, it is important to note that it remains 52% lower than its record closing high of INR 160.30, which was attained on November 15, 2021.
Over the course of the last month, the stock has experienced a notable rally of 27%, primarily driven by improved operational performance. Currently, it is trading at its highest level since June 2022. Impressively, the stock has rebounded by 91% from its record low of INR 40.55, which was reached on July 27, 2022.
The stock is witnessing increased investor interest due to several positive factors, including improved earnings and its recent addition to the long portfolio of Chris Woods from Jefferies. Woods has assigned a weight of 4% to the stock in each of his long-only portfolios. This endorsement by a prominent investor has further fueled buying interest and confidence in the stock’s potential.
During the March quarter, Zomato Ltd. reported a narrower loss, which was viewed positively by analysts. The net loss for Zomato decreased to INR 188 crore, compared to INR 360 crore in the same quarter the previous year and INR 345 crore in the previous quarter. Additionally, the company’s consolidated revenue witnessed an impressive 70% year-on-year surge, reaching INR 2,056 crore. These results indicate a significant improvement in Zomato’s financial performance and demonstrate its ability to generate substantial revenue growth.
According to Jefferies, the key drivers for improved profitability are expected to be margin expansion in the food sector and a reduction in losses for Blinkit. Despite facing challenging macroeconomic conditions that created obstacles to growth, the management has demonstrated a proactive approach to enhancing profitability. This commitment is evident even with the launch of the Gold program, showcasing their determination to achieve positive financial outcomes.
Additionally, Jefferies acknowledges the emergence of “green shoots” indicating positive progress. In the first quarter, there is an expected high single-digit percentage increase in the gross order value, which is viewed as a favorable development. This growth in gross order value signifies encouraging signs of improvement for the company’s operations.
Interestingly, Zomato’s share price has been reaching a 52-week high, even though the hashtag ‘#BoycottZomato’ has been trending on Twitter. This trending hashtag emerged following a controversial ad campaign displayed by Zomato on World Environment Day. Despite Zomato apologizing to the public for unintentionally causing hurt sentiments, the hashtag ‘#BoycottZomato’ started trending on Friday morning.
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