Zomato shares hit 52-week high, rise 100% in six months; what should investors do?

Shares of online food delivery provider Zomato Ltd hit their 52-week high amid a rally in the broader market today. With today’s rally, the stock has doubled in the last six months. Zomato stock rose 2.78% to a high of Rs 109.05 against the previous close of Rs 106.10 on BSE. Zomato stock opened flat at Rs 106.90 on BSE. In a year, the Zomato stock has risen 64.79% and climbed 79.42% in 2023.

In the afternoon session, total 35.77 lakh shares of Zomato changed hands amounting to a turnover of Rs 38.62 crore on BSE. The market cap of the firm rose to Rs 93,014 crore. Zomato stock has a one-year beta of 1.7, indicating very high volatility during the period.

In terms of technicals, the relative strength index (RSI) of Zomato stock stands at 62.6, signaling it's trading neither in the overbought nor in the oversold zone. Zomato shares are trading higher than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages.

Here's a look at the outlook of the stock.

ICICI Securities has turned bullish on the stock. The scrip has the potential to rise another 51 per cent. It has revised its target price to Rs 160 from the Rs 120 earlier. The domestic brokerage said Zomato was looking attractively valued compared with many global and Indian peers on profit multiples.

"Given the outlook of sharp profitability improvement in all three businesses of Zomato, we believe valuations for the stock are now pretty sensible. We therefore think there is enough room for meaningful rerating of the stock. While our target of Rs 160 is DCF based, we have tried to back calculate implied multiples for each of the business using an SOTP framework," said ICICI Securities.

Vaishali Parekh, AVP- Technical Research & Analysis at Prabhudas Lilladher said, “The stock has witnessed a decent appreciation in the last six months gaining more than 100% which is quite significant. The stock has maintained above the important 50EMA zone and is in a strong trend expecting for further rise in the coming days. Also, the Cricket World Cup event would boost the business for the next one and half month. The near term support zone is at around Rs 95 levels and on the upside, the next target levels are visible at Rs 118 and Rs 135 levels.”

Aditya Gaggar, Director of Progressive Shares said , "In July, Zomato gave a breakout from the Rounding Bottom Formation with volumes while in the lower timeframe, the stock is in the rising channel (Higher Top Higher Bottom Formation), which suggests a continuation of an uptrend. Trend following indicators such as MACD or ADX indicate the presence of a strong trend. As per the Rounding Bottom Formation, the target is Rs 118."

JM Financial is positive on the Zomato stock and kept its target price unchanged at Rs 115.

“We continue to be bullish on the company's long-term growth prospects in the hyperlocal delivery space as we believe it is well positioned to benefit from robust industry tailwinds such as improving tech penetration and rising income share of digitally native millennials / GenZ. Balance sheet remains strong with net cash of Rs 11570 crore as of June 23. We continue to value the consolidated business using a 15-year DCF (WACC of 13% and Tg of 6%) to arrive at an unchanged September 24 fair value for Zomato of Rs 115, ” said the brokerage.

Abhijeet fromTips2trades said, "Zomato is bullish on the Daily charts and a close above resistance of Rs 109.5 could lead to a target of Rs 118 in the near term. Strong support will be at Rs 101.6."

In the first quarter of this fiscal, Zomato reported a net profit of Rs 2 crore against a net loss of Rs 189 crore and Rs 186 crore loss in the March 2023 quarter and June 2022 quarter, respectively. The consolidated adjusted EBITDA rose to Rs 12 crore for the April-June quarter. However, it posted an EBITDA loss of 152 crore in the year ago quarter.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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