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Zomato shares dropped 13% on Tuesday, January 21, after the food shipment titan reported a 57% year-on-year decrease in combined web revenue
Zomato Shares Fall 8%
Zomato Share Price: Zomato shares dropped 13% to the day’s short on Tuesday early morning, after the food shipment titan reported a 57% year-on-year decrease in combined web revenue for the December quarter, publishing Rs 59 crore contrasted to Rs 138 crore in the exact same duration in 2015.
Zomato reported a 2% quarter-on-quarter development and a 17% year-on-year rise in food shipment, regardless of a more comprehensive “need stagnation,” as noted in its shareholder letter. The company’s consolidated revenue from operations reached Rs 5,405 crore, up from Rs 3,288 crore in the December quarter of the previous fiscal year. However, total expenses also rose to Rs 5,533 crore, compared to Rs 3,383 crore in the same period of 2023-24.
Further Downside for Zomato Stocks?
Zomato Ltd shares have already fallen 17% in 2025, and according to Macquarie’s latest target price after the Q3 results, the stock could face an additional 44% downside.
Macquarie pointed out that Zomato’s earnings for the December quarter were below both its own estimates and consensus expectations, primarily due to investments in Blinkit and rising employee expenses.
The research firm highlighted that consensus forecasts expect Blinkit’s gross order value (GOV) to grow 3.5 times between FY25-28, reaching $11 billion, alongside an expansion in adjusted EBITDA margin from -1.3% to 3.5%. However, Macquarie flagged significant downside risks to this margin expansion, especially amidst intense competition, and warned that a prolonged period of negative margins remains a possibility.
In the food delivery segment, Macquarie predicts a mild downside to the consensus forecast, which estimates a 20% three-year GOV CAGR and a 4.5-5% adjusted EBITDA margin for FY26-28.
While Macquarie sees Zomato as an efficient quick commerce and food delivery platform, it believes the stock has limited margin for safety. Increased competition in the quick commerce space could hinder consensus forecasts, and Macquarie’s discounted cash flow (DCF)-based price target of Rs 130 implies a 55x FY27 PE ratio (adjusted for treasury income).
For the third quarter, Zomato’s GOV in quick commerce grew 120% YoY, surpassing Macquarie’s estimates due to strong monthly transacting user (MTU) additions. However, this growth was likely driven by higher marketing expenses, resulting in an adjusted EBITDA margin of -1.3% of GOV, below expectations of a near-break-even.
Blinkit added 216 dark stores in Q3, bringing its total to 1,007 stores as of December 31. The company revised its store target for December 2025 to 2,000 stores, up from its previous target of 2,000 by December 2026.
In the food delivery segment, GOV grew 17% YoY, missing expectations, while MTU saw a slight QoQ decline to 20.5 million. Adjusted EBITDA margin expanded by 75 basis points QoQ, reaching 4.3% of GOV.
Global brokerage firm Jefferies has maintained a ‘Hold’ rating on Zomato, but revised its price target down to Rs 255 from Rs 275 per share, following a mixed Q3 performance. While the food delivery segment showed modest growth as anticipated, there was a better-than-expected improvement in margins.
Jefferies noted that quick commerce experienced strong growth but slipped into losses due to increased investments and intensified competition. The management has set an ambitious target to double Blinkit’s store count to 2,000 by December 2025, a year ahead of the original plan. However, this aggressive expansion is expected to keep Blinkit in the red in the near term, as mentioned in Zomato’s post-earnings letter to shareholders.
The brokerage added that while Blinkit has a strong execution track record, the aggressive expansion could trigger competitors to ramp up their efforts as well.
Nomura, meanwhile, maintained a ‘Buy’ rating on Zomato, with a target price of Rs 290 per share. The firm acknowledged the growing competition in the quick commerce space but believes Zomato is well-positioned to remain among the top two players. While food delivery growth has slowed, the improvement in profitability came as a pleasant surprise. Nomura also highlighted Zomato’s strong execution and healthy balance sheet as positives for Blinkit.
Bernstein, which holds an ‘Outperform’ rating and a Rs 310 price target, noted Zomato’s increased focus on quick commerce and its aggressive expansion plans for dark stores. However, it cautioned that the strategy of rapid growth has led to margin pressures in quick commerce. On the food delivery front, Bernstein pointed out that performance exceeded expectations, and margins are expected to stabilize at 5% adjusted EBITDA. The brokerage sees any stock correction due to competition concerns as a potential buying opportunity.
Morgan Stanley, however, remains more cautious and sees a downside risk for Zomato, projecting the stock price to drop to Rs 195-Rs 215 levels.
Nuvama also lowered its price target for Zomato to Rs 300 from Rs 325 but maintained a ‘Buy’ rating. It noted that Blinkit’s dark store additions are exceeding expectations, which is driving faster growth. However, Nuvama warned that the upfront costs for these stores could hurt short-term profitability. Despite this, the firm expects stronger earnings as these stores mature.
Out of the 28 analysts covering Zomato, 24 have a ‘Buy’ rating, one has a ‘Hold’ rating, and three have a ‘Sell’ rating.
At 9:40 am, Zomato shares were trading 6.82% lower at Rs 223.40, although the stock has gained 77% in the past year.
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