Jefferies Retains ‘Buy’ On Zomato Even As Shares Slide To A New Low


“Worries of Fed tightening are weighing on the profitless internet names globally. The entire sector has been going through a period of readjustment as the focus is shifting from growth to cash flow,” Jefferies said. “This has also been impacting the global food delivery stocks, with Zomato being the worst-performing.”

But even after the “sharp correction in Zomato share price, the stock now trades at 0.9x 1-year forward EV/GMV and 3.5x EV/revenue”. While this, it said, is at a premium to global and regional peers, this is justified in the context of long growth runway along with higher explicit medium-term forecasts on gross merchandise value (30% for Zomato versus 10-20% for peers).

Jefferies said unlike the past when Zomato intended to invest across multiple businesses, the company now plans to conserve cash. It does not plan to commit any resources for existing or now minority investments.

“We also see a consistent improvement in profitability in food delivery despite strong 30% CAGR over FY22-25E (well ahead of global/regional peers). We retain buy.”

Jefferies is not alone. Of the total 18 analysts tracking Zomato, 14 have a ‘buy’ rating on the stock. Two each suggest a ‘hold’ and a ‘sell’, according to Bloomberg data. The 12-month consensus price target implies an upside of 83.8%.


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