Zomato shares surge nearly 8%: What's driving the rally?
What's the story
Zomato's share price experienced a significant boost of nearly 8% in early morning trading today, reaching ₹261.60 per share.
This increase follows global brokerage firm JP Morgan's decision to raise its target price for the stock from ₹208 to ₹340 per share.
The new target price suggests a potential upside of 40% from Zomato's previous closing price of ₹242 per share.
Growth prospects
Blinkit's expansion fuels JP Morgan's confidence in Zomato
JP Morgan's revised target price for Zomato is primarily driven by the successful expansion of Blinkit, a quick commerce venture owned by Zomato.
The brokerage firm expects that the growth of Blinkit will significantly enhance monetization through channel margins and advertising revenue.
Additionally, it predicts improved store-level economics to further boost the company's EBITDA outlook.
Market disruption
Blinkit's potential to disrupt modern trade and e-commerce
JP Morgan believes that Blinkit has the potential to disrupt both modern trade and e-commerce sectors.
As a result, the brokerage firm has increased its FY25-27 forecasts for Zomato by 15-41%.
This revised projection also takes into account a larger "Going Out" business, which now includes core dining along with Zomato's newly acquired ticketing business from Paytm.
Market leader
CLSA names Zomato as top consumer pick in India
CLSA has named Zomato as its top consumer pick in India due to its rapid growth and Blinkit's increasing market share.
The brokerage firm believes that Zomato will be the primary beneficiary of the transformation in India's supply chain driven by quick commerce.
CLSA also anticipates that Blinkit will achieve profitability in FY25, despite the expansion of stores.
Market confidence
Other brokerage firms raise target prices for Zomato
UBS recently increased its target price for Zomato's stock to ₹320 per share, citing the company's better-than-expected June quarter results.
Jefferies also adjusted its target price on Zomato to ₹275 apiece, maintaining a 'buy' rating.
Morgan Stanley reaffirmed its "overweight" rating on Zomato with a target price of ₹278 per share.
Nomura raised its target price for Zomato to ₹280 from ₹225 earlier this month, while maintaining a "buy" recommendation.