Zomato Shares Dropped by 10%! Check out the reasons behind the Drop and what Investors should do now.

Zomato, a well-known food delivery platform, recently experienced a significant 10% drop in its stock price during a single trading session. This abrupt decline has sparked concerns among investors and market analysts. On 21^st Jan. 2025, Tuesday around 10:22 AM saw a sharp 10% decline in its Q3 FY25 net profit.

Zomato shares were trading at ₹218.25, reflecting a 9.42% decline, following a drop in the previous trading session. The steep fall came after the company reported a 57.25% drop in its Q3 FY25 net profit, which fell to ₹59 crore from ₹138 crore in the same quarter last year. Although revenue from operations rose to ₹5,405 crore, overall growth remained weak.

History of Zomato

• Founding: Zomato was founded in 2008 by Deepinder Goyal and Pankaj Chaddah.
• Initial Focus: Originally launched as a platform for restaurant menus and reviews, Zomato later expanded into food delivery and restaurant discovery.
• Global Reach: At its peak, Zomato operated in over 20 countries, revolutionizing the way people find and order food.
• Public Offering: The company went public in July 2021, with its IPO drawing considerable investor interest, reflecting the growing appetite for India’s tech-driven firms.
• Service Expansion: Zomato diversified its services to include Zomato Gold (now Zomato Pro), intercity food delivery, and grocery delivery.
• Competition: The company faces tough competition from major players like Swiggy.
• Challenges: Despite its leadership and innovation, Zomato has encountered difficulties with maintaining profitability, navigating regulatory challenges, and dealing with rising competition.

Zomato Share Price Live Updates: Analysts Recommend Buy Rating

Zomato Share Price Live Updates: Below is the trend of analyst recommendations, with the current rating being “Buy.” The median target price is ₹317.0, representing a 46.79% increase from the current market price. The lowest target price predicted by analysts is ₹130.0, while the highest estimate is ₹400.0.

These target price projections are for the next 1 year

Ratings	Current	1 Week Ago	1 Month Ago	3 Months Ago
Strong Buy	14	13	13	12
Buy	8	9	9	9
Hold	1	1	0	1
Sell	2	2	2	2
Strong Sell	0	0	0	0

Why Did Zomato Shares Drop by 10%?

Zomato’s recent 10% decline in stock price has caught the attention of investors. Here are the key factors behind this downturn:

• Disappointing Financial Performance: Zomato’s latest quarterly results missed market expectations, with revenue growth offset by a wider loss due to increased operational costs and higher spending on customer acquisition.
• Lower Growth Projections: Management’s outlook for the upcoming quarters suggested slower growth than anticipated, which has negatively affected investor sentiment.
• Macroeconomic Challenges: Rising inflation and interest rates have impacted consumer spending, especially on non-essential services like food delivery, leading to a reduction in order volumes and lower average order values.
• Intensified Competition: Zomato faces growing competition from Swiggy and other emerging players, which has led to increased discounting and promotional costs.
• Profit-Taking by Investors: After a strong rally in Zomato’s stock earlier this year, some investors may be cashing out, contributing to the recent price drop.

What Zomato Investors Should Do Now?

1. Brokerage Outlook: Despite the recent sharp decline in Zomato’s share price, most brokerages remain positive about the company’s future.

2. Nomura’s View:  Zomato faces a more challenging environment but is optimistic about its quick-commerce division, Blinkit, which is expected to become a top-two player in the market.

3. Jefferies’ View – Jefferies remains confident about Blinkit’s performance and the management’s goal to double its store count by 2,000 by December 2025 but has lowered its target price to ₹255 while maintaining a ‘HOLD’ rating.

4. Bernstein’s View – Bernstein has retained an ‘OUTPERFORM’ rating on Zomato with a target price of ₹310, citing increased competition in the quick-commerce space for the stock’s recent decline.

5. Nuvama Institutional Equities’ View – Nuvama noted that Blinkit’s dark store expansions surpass expectations, leading to faster growth. While the initial costs of adding these stores are expected to impact short-term profitability, Nuvama believes they will contribute to better profitability in future quarters as the stores mature. As a result, Nuvama has reduced its target price to ₹300 but has maintained its ‘BUY’ recommendation.

6. Other Brokerages’ Target Prices – CLSA (Credit Lyonnais Securities Asia) has set a target price of ₹400 for Zomato. In contrast, BofA (Bank of America) Securities has set it at ₹375, and Nomura India has set its target price at ₹290.

What is the future of Zomato in the share market?

Analyst projections for Zomato’s stock price in 2025 vary, with some expecting gradual growth.

• Exla Resources forecasts the stock price to reach ₹336.85 by December 2025.
• TradingView analysts predict a target price of ₹305.04, with estimates ranging from ₹130.00 to ₹400.00.
• MarketScreener reports an average target price of ₹298.81 from 27 analysts, suggesting a potential upside of 24.64% from the last close price of ₹239.75.
• Trendlyne.com suggests an average target price of ₹289.67, indicating a potential upside of 35.49% from the last price of ₹213.80.
• Overall, there is general optimism about Zomato’s future stock performance, although individual estimates differ.

Conclusion

Although Zomato’s 10% drop in share price is worrisome, it’s important to look past short-term fluctuations and focus on the company’s long-term potential. As a leader in India’s food tech sector, Zomato holds a strong market position, but it faces challenges that necessitate strategic changes. Investors should stay updated, proceed with caution, and make decisions based on a careful evaluation of both risks and opportunities.

Sources: msn.com