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Zomato's Big Bite: Can It Outpace Swiggy and hit ₹400?

Zomato’s stock has shown an upward trajectory since mid-2023, driven by technical indicators and a promising breakout pattern. With targets set at Rs 400, this analysis unpacks its rise, compares it with Swiggy’s strategy, and evaluates Zomato’s growth prospects. Equipped with data, expert insights, and actionable advice, this is your guide to understanding Zomato’s potential.

What makes Zomato’s stock Buzz-Worthy today?

In the financial marketplace, Zomato has emerged as an interesting subject of analysis. From June to November 2023, the stock journeyed through dramatic highs and lows, reaching close to Rs 300 in September before a subsequent dip. But here’s the intriguing part—it is climbing back with solid technical indicators. Let us uncover what makes Zomato a compelling pick today.

       Zomato's Big Bite: Can It Outpace Swiggy and Hit ₹400?

Zomato stock view by Bharat Gala, COO equity broking- Ventura Securities

“Zomato has exhibited a consistent upward move since June and made a high of 298 in September. A correction then followed with a lower top formation and then the stock made a low of 240 in November. Its KST, Aroon Up/Down and Demand Index indicators are positive. Recently, it showed a symmetrical triangle breakout by a positive weekly price candle supported by volumes. After trading around the moving average for a while, Zomato is now clearly trading above its moving average. The target is 400 with support levels of 260, 254, and 248, where more shares can be accumulated. The stop loss would be 238.”

Did Zomato make it to TusharMangl.Com’s Diwali Picks?

Yes, Zomato was spotlighted in TusharMangl.Com’s Diwali Stock Investment Ideas. The feature highlighted Zomato as a strong contender for long-term investment, citing its market leadership in food delivery and expanding presence in quick commerce. The article spotlights Zomato as forecasted to grow its revenue at a CAGR of 55% through FY27.

Is Zomato’s technical performance justified by its fundamentals?

Zomato’s technical chart shows the following:

  • Symmetrical Triangle Breakout: This classic chart pattern signals a potential continuation of an upward trend.
  • Indicators: The KST, Aroon Up/Down, and Demand Index are firmly in the positive zone, bolstering investor confidence.
  • Moving Average Dynamics: Zomato’s price has decisively moved above its key averages, a bullish sign.

But what About Swiggy? Is the rivalry heating up?

Motilal Oswal’s coverage of Swiggy underscores its ambition. Swiggy IPO generated a lot of buzz recently. Swiggy’s unified app caters to high-frequency needs like food delivery and groceries. It boasts cross-service efficiency, an area where Zomato has a narrower focus. However, Zomato maintains an edge in food delivery and quick commerce due to its early mover advantage and operational focus. In food delivery space, we can easily see an emergence of  a duopoly with players like Uber Eats and Food Panda out of the market.

What does Motilal Oswal say on Swiggy?

Interestingly, while Ventural Securties is bullish on Zomato today, Motilal Oswal has intiated coverage on Zomato's main rival Swiggy. Here is a quote from them - 

"Swiggy - Initiating Coverage: “Quick” commerce, delayed gratification

Swiggy’s platform covers everything from food delivery to grocery needs in one app. Leveraging a unique blend of convenience, high-frequency offerings, and user stickiness, Swiggy stands out in the competitive landscape. While Zomato currently holds the lead in food delivery and quick commerce businesses, Swiggy’s all-in-one app strategy enables strong cross-utilization across services and better operational efficiency.

We believe quick commerce is a once-in-a-lifetime opportunity to disrupt how Indian consumers shop for not just groceries but a variety of essential and non-essential goods, and Swiggy could be a top player in an exponentially growing market. Current numbers, however, suggest that despite being an innovator and a category inventor across both food delivery and quick commerce, Swiggy has let its leadership slip away. Tight execution and better leveraging its platform can fix these issues, in our opinion.

Swiggy is well-positioned to capitalize on this growth by expanding its customer base, increasing the order volumes and values, and improving its unit economics and profitability. We initiate coverage with a NEUTRAL rating and a TP of Rs 475."

How Does Zomato Compare financially?

  • Profit and Loss: Zomato’s consolidated revenue for FY2023 soared to Rs 7,200 crore, with a reduced net loss of Rs 650 crore compared to Rs 1,200 crore the previous year.
  • Cash Flows: Zomato reported positive operational cash flows in the last quarter, indicating improving fundamentals.
  • Market Cap: At Rs 1.1 trillion, Zomato leads the food-tech market, dwarfing Swiggy’s estimated valuation of Rs 95,000 crore.

What role does Quick Commerce play in Zomato’s growth?

Quick commerce has revolutionised urban shopping patterns. Zomato, through its Blinkit acquisition, has fortified its presence in this burgeoning segment. It recorded a 35% increase in order volume YoY for Blinkit, showcasing robust demand.

How do dividends and shareholder value stack up?

Zomato has yet to declare dividends, focusing instead on expansion. While this might deter dividend-seeking investors, it aligns with its growth-phase strategy.

What should investors watch out for?

  • Entry Points: ₹260, ₹254, and ₹248 are strong accumulation zones.
  • Target Price: Analysts suggest a price target of ₹400.
  • Stop Loss: Maintain a disciplined stop-loss at ₹238 to manage risks.

Why do experts remain bullish on Zomato?

The bullishness stems from Zomato’s:

  1. Market Dominance: Leading position in food delivery.
  2. Quick Commerce Potential: Early mover advantage with Blinkit.
  3. Technical Breakout: A strong chart pattern supporting future gains.

Frequently Asked Questions (FAQs)

Why has Zomato’s stock gained traction recently?

Its technical indicators and market-leading position in food delivery make it an attractive pick.

How does Zomato stock compare to Swiggy?

While Zomato leads in food delivery, Swiggy’s unified app strategy poses a significant competitive challenge.

Is Zomato a good investment?

Analysts see potential in its stock reaching Rs 400, supported by fundamentals and market trends. It has however, seen some senior level exits recently.

Does Zomato pay dividends?

Not yet. The company reinvests its earnings to fuel growth.

What is the risk of investing in Zomato?

Market volatility and Swiggy’s competition could pose risks. A disciplined approach with stop-losses is advised.

Conclusion

Zomato and Swiggy story isn’t just about food delivery; it is a reflection of India’s evolving consumption patterns. The stock’s recent breakout suggests promising potential especially in the consumption/retail/technology space.

Disclaimer

The information provided in this article is for educational and informational purposes only. It should not be considered financial advice or a recommendation to buy or sell any stock. Investing in the stock market involves risks, and you should consult a financial advisor or conduct thorough research before making any investment decisions.

We at TusharMangl.Com aim to empower you with insights to help you make informed choices. Invest wisely and at your own discretion.

About the Author

Tushar Mangl is an energy healer, Vastu expert, and author. He pens insights on finance, mental health, and balanced living.

Note: For more inspiring insights, subscribe to the YouTube Channel at Tushar Mangl!

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