Zomato stock rebounds after losing 8% in 4 days; what should investors do?

Zomato Share Price NSE BSE News: Zomato shares registered mild gains on Monday, snapping a four-day losing streak, after foreign brokerage Jefferies maintained its 'buy' rating for the stock with a target that implied more than 30 per cent upside from their previous close. The Zomato stock rose by as much as Rs 9.6, or 3.7 per cent, to Rs 267 apiece on BSE and NSE each, marking a recovery of nearly half of the losses recorded in the past four seasons. 

Zomato shares ended higher by Rs 8.3, or 3.2 per cent, and Rs 7.7, or 3.0 per cent, at Rs 265.7 and Rs 265.2 apiece on BSE and NSE respectively.

On Thursday, Zomato said its board will meet on Tuesday to consider raising funds through a qualified institutional placement of shares, subject to such regulatory and other necessary approvals. Its board will also consider its financial results for the July-September period on the same day. 

Zomato Share Price News | How Jefferies views the food delivery company

Describing Zomato's move to announce the QIP as "surprising yet interesting", Jefferies highlighted that the decision comes despite a sum of $1.2 billion available on the company's books with a rising free cash flow (FCF) in its food segment. 

A likely raise of $1 billion, if confirmed, along with Zomato's move to apply to the RBI to cap its FII holding at 49 per cent will likely convert Zomato into a domestic company, enabling a first-party model in quick commerce that could improve its profitability. 

This may also result in the removal of the stock from the MSCI universe and the process of capping the FII holding may take time, according to the brokerage. 

Currently, Zomato's subsidiary, Blinkit, operates a marketplace model wherein local third-party entrepreneurs own the inventory and sell it to users on the Blinkit platform. 

An inventory model will allow Blinkit to have tighter control over the inventory and take calculated risks when it comes to launching or scaling up new categories, as it expands well beyond groceries, according to Jefferies. 

How other analysts view Zomato 

Domestic brokerage Motilal Oswal Financial Services has a 'buy' rating on Zomato with a target price of Rs 320. 

Zomato Q2 FY25 Results Date

Zomato is scheduled to announce its financial results for the July-September period (Q2 of FY25) on October 22.

Zomato Share Price History 

Zomato shares have more than doubled in value in 2024 so far, with a return of 110 per cent, sharply outperforming a 14.3 per cent rise in the headline Nifty50 index.

At Monday's high, the Zomato stock commanded a premium of 251 per cent over the upper end of its issue price. 

Zomato shares entered the listed space in July 2021.  

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