Why Zomato Share Price is Rising

Zomato's journey has been a rollercoaster. After a rocky start with its IPO and subsequent losses, it seemed like a distant dream for the company to recover.

But it's often said that the most unexpected turnarounds can yield the most rewarding outcomes. Zomato's journey is a quintessential example of this adage.

Post its much-hyped but ultimately disappointing listing in July 2022, the company faced a storm of criticism, exacerbated by persistent losses. The situation looked bleak, with investor confidence at an all-time low.

However, against all odds, Zomato has staged a remarkable comeback. Not only has it managed to turn the tide on its financial performance, but it has also embarked on a breathtaking rally.

With a staggering 162.7% return in the past year and a continued upward trajectory, a 23.5% surge in the last month, and a 11.1% jump in the past five day.

Let's find out what's fueling this recent resurgence?

#1 Strong Quarterly Results

Zomato's consolidated net profit for Q1FY25 rose to Rs 2.5 billion (bn) from Rs 20 million (m) in the same quarter a year ago. The base quarter marked the first time Zomato reported a quarterly net profit.

Rise in net profit was driven by higher gross order value across its food delivery, quick commerce, and going-out verticals. Profitability was also boosted by higher other income.

Other income stood at Rs 2.4 bn, compared to Rs 1.8 bn a year ago. Zomato generates higher other income from the Rs 120 bn-plus cash it holds.

Consolidated revenue for the quarter was Rs 44.4 bn, up from Rs 26 bn a year earlier.

Earnings before interest, tax, depreciation, and amortisation (EBITDA) for the quarter was a positive Rs 1.8 bn. The company had reported an EBITDA loss of Rs 480 m in the same period last year.

Zomato's gross order value (GOV) during the quarter increased by 53% to Rs 154.6 bn. GOV includes consumer-facing businesses like food delivery, quick-commerce, and going-out.

Blinkit, Zomato's quick-commerce business, reported an adjusted EBITDA of a negative Rs 30 m. The company added 113 stores, exceeding their guidance of 100 stores.

Impressed by Zomato's robust financials, several brokerage firms have upwardly revised their target price for the stock.

#2 Launch of New App

Last week the food delivery giant launched a new app, 'District'.

This app targets the expanding 'going out' segment, which includes movies, shopping, and staycations. This launch is part of Zomato's efforts to broaden its services beyond traditional food delivery.

Zomato's dining-out business allows customers to discover restaurants for dining. It has an annualised gross order value exceeding US$ 500 m and is profitable.

Zomato's chief executive, Deepinder Goyal, said there is an opportunity to expand the going-out offering further.

The company plans to build on the dining-out business and explore additional use cases in the going-out space, including sports, ticketing, and live performances.

Zomato plans to use its app's existing traffic to build 'District' as a separate brand. The company intends to keep customer acquisition costs low by leveraging the traffic from the Zomato app, similar to how the company built Blinkit.

The strong financial performance and strategic expansions are boosting Zomato's share price.

What Next?

Going forward Zomato plans to expand its going-out offerings by building on its dining-out business.

This expansion will include new areas like sports, ticketing, and live performances. It aims to leverage the strong foundation of their dining-out segment to capture more market share in the going-out space.

The launch of 'District' comes at a time when Zomato is experiencing strong financial performance. This robust performance is boosting the share price.

As Zomato continues to diversify and grow its services, its market position is likely to strengthen further.

The company's growth plans are supported by a solid cash reserve of over Rs 120 bn. This allows the company to invest in new ventures and expand existing ones without financial strain.

Additionally, Zomato is focused on improving its profitability by increasing gross order value and other income.

How Zomato Share Price has Performed Recently

In the past five days, Zomato share price has rallied 11.2%. In the last month, it is up 23.6%.

In 2024, so far its share price has surged 106.1% and it has rallied 162.9% in the last one year.

The stock touched its 52-week high of Rs 278.5 on 2 August 2024 and a 52-week low of Rs 88.2 on 21 August 2023.

About Zomato

Zomato was incorporated in the year 2010. The company, during its initial stages, started off as a restaurant finder.

Following in the footsteps of its competitor, Swiggy, the company formally launched its food delivery service in India in the year 2015.

By 2020, Zomato expanded its food delivery business to over 500 cities, facing stiff competition from both Swiggy and Uber Eats.

However, during the same year, the company acquired Uber Eats to consolidate its position in the food delivery space.

For more details, check out Zomato company fact sheet and quarterly results.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Happy Investing.

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