Investors laud Zomato for keeping its word as stock price drives to a 52-week high

Zomato’s stock increased by almost 2 per cent during trading on the National Stock Exchange (NSE) on September 18, reaching a 52-week high of Rs 105 ($1.26), Moneycontrol reported. However, compared to its previous rate, the stock closed 0.87 per cent lower at Rs 102.05 ($1.23) per share.

This increase was ascribed to investors' rising trust in the business, which was sparked by Zomato's transparency in proving revenue growth and margin expansion.

In a Jefferies research, the majority of investors praised CFO Akshant Goyal for keeping his word during the company's US roadshow. In the report, Jefferies noted that while scepticism was strong at the time, presently, it is the opposite.

Zomato CFO anticipates a 20 to 25 per cent growth in the value of its meal delivery service and a staggering 60 per cent CAGR for its brand-new rapid commerce venture. Given that restaurants only account for 10 per cent of India's food consumption, food delivery has a "vast growth runway." By providing restaurants with local insights that increase food diversity and stimulate local demand, Zomato is facilitating growth, according to Jefferies.

However, in India's enormous retail market, Zomato's rapid commerce may grow even more than food delivery.

Additionally, Jefferies anticipates a gradual increase in food margins to 5 per cent, with rapid commerce likely to reach break-even in four quarters.

With only 20 million monthly active users at present, according to Jefferies, who rates Zomato as a "buy" with a target price of Rs 130 ($1.56), Zomato has a significant amount of room to develop both its user base and its revenue. However, it says that this can compromise short-term financial success. After its IPO, the company, changed its emphasis from survival to being prepared for the future, according to the report.

Zomato shares were trading at Rs 104.10 ($1.25) as of 11:24 a.m. The share price has increased by 96 per cent during the past six months.

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