India’s Zomato soars to record high, defying slow trend in internet stocks

Zomato, India's leading food delivery platform, reached a record high in share value on Friday, signalling a notable turnaround in investor sentiment.

According to a Reuters report, the surge in Zomato's stock price, fuelled by improved profitability prospects, highlights a major departure from the tepid performance witnessed by several new-age internet companies post-IPO.

Despite initial scepticism over lofty valuations and business models, Zomato has emerged as Asia's most valuable internet stock in India, boasting a market capitalization exceeding 1.51 trillion rupees ($18 billion).

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"Investors are incrementally appreciative of whatever Zomato is trying to do, and there is a certain amount of consumer love for the business model too," remarked Sachin Dixit, an internet research analyst at JM Financial.

The company's consistent earnings growth and successful execution of growth strategies have contributed to a reversal in investor perception, propelling its stock to new heights.

Zomato's robust financial performance, surpassing market expectations for several consecutive quarters, distinguishes it from peers grappling with profitability challenges.

According to Karan Taurani, an analyst at Elara, Zomato's "consistent earnings improvement" and adherence to growth targets set it apart from competitors lacking a clear path to profitability.

Despite the buoyancy observed in Zomato's trajectory, other players have encountered hurdles.

Nykaa, once a market favourite, faces macroeconomic challenges, signalling a shifting landscape within the sector.

In contrast, Paytm's woes under regulatory scrutiny have translated into a major downturn in its stock performance.

However, Zomato's dominance, with over half the market share in food delivery, continues to position it as a formidable force, analysts affirm.

Zomato's acquisition of Blinkit, its quick commerce arm, in 2022, is poised to contribute substantially to its future growth trajectory.

Analysts anticipate Blinkit to achieve EBITDA (Earnings before interest, taxes, depreciation, and amortisation) positivity in the next fiscal year, further bolstering Zomato's position in the market.

(With inputs from Reuters)