India: Zomato shares hit 52-week high after report of first net profit

The shares for India’s online food delivery platform Zomato reached a 52-week high on Monday (August 7), with a continuous rise for a fifth session in a row. Zomato stock gained by as much as 7.7 per cent to Rs 102.85 ($1.24) on the Bombay Stock Exchange (BSE). Zomato shares were able to cross the Rs 100 mark for the first time since January 2022.

What happened?

Last week, Zomato reported an ahead-of-schedule quarterly net profit for the June quarter of FY24. This comes after the company reported net losses for each of the eight quarters since it went public in 2021. Eventually, later in the day, the company’s stock settled at Rs 97.66 ($1.18) apiece, up 2.34 per cent on the BSE.

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Zomato reports profit

The rise in stock price and investor interest comesafter the company announced its recent consolidated net profit of Rs 2 crore ($0.24 million) for the April-June quarter of 2023 against a loss of Rs 186 crore ($22 million) in the same quarter last year, as per the report.

The company also reported consolidated revenue from operations in the first quarter of the current fiscal year as Rs 2,416 crore ($291 million) when compared to Rs 1,414 crore ($171 million), last year.

“Zomato has delivered profitability earlier than promised. There is clarity on vastly improving revenue growth. This company in a duopoly business has a long runway for growth,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, as per Zee Business.

He added, “For those investors who bought at low rates partial profit booking is fine. It makes sense to remain invested in this growth stock.”

Zomato shares completed two years in the listed space in July.

Some analysts believe Zomato share price rally was largely led by the report of the profits. “Zomato share price is seeing the rally on the back of euphoria around better Q1 results. However, the company still has a long way to go to become EBITDA positive,” said Avinash Gorakshakar, Director of Research atProfitmart Securities, according to the Mint.

He added, “All the positives have been factored in by the current share price for the near term. Hence, we may see profit booking in Zomato share price going ahead after this rally.” He also noted that the Zomato share valuations are still very high and do not make sense at these prices.

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