Zomato shares gather steam to touch 52-week high; here's what's driving the stock

Online food delivery firm Zomato's shares touched a 52-week high on Monday, continuing to rise for the fifth session in a row. The Zomato stock gained by as much as Rs 7.4 or 7.8 per cent to Rs 102.9 apiece on BSE, surpassing a 52-week high touched on Friday. The stock settled at Rs 97.66 apiece, up by Rs 2.23 or 2.34 per cent on BSE.

Last week, Zomato reported an ahead-of-schedule quarterly net profit, in a sign it was on track to sustained earnings growth. The company had reported net losses for each of the eight quarters since it went public in 2021.

Its consolidated net profit came in at Rs 2 crore for the April-June period as against a net loss of Rs 186 crore for the corresponding quarter a year ago, according to a regulatory filing. The company reported a deferred tax gain of Rs 17 crore for the three-month period.

"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.

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

Motilal Oswal Financial Services reiterated a 'buy' rating on Zomato after the earnings announcement. The brokerage's target price of Rs 110 implies an upside of 15.3 per cent in Zomato shares from Friday's closing price.

The brokerage said Zomato's revenue growth was led by its food delivery business. Disruptions in Blinkit in April-May should reverse in the September quarter, Motilal Oswal said.

Motilal Oswal Financial Services pointed out that it sees Zomato's strong all-round performance "as an indicator of an accommodative competitive environment in both food delivery and quick commerce verticals".

Zomato shares completed two years in the listed space in July. The Zomato stock made a stellar debut in the secondary market, listing at a premium of 53 per cent, after its IPO saw an overall subscription of more than 38 times the equity on offer.

(With inputs from agencies)