Zomato shares: Jefferies cuts target price; here's why 

Foreign brokerage Jefferies has reportedly downgraded Zomato Ltd to 'Hold' from "Buy' rating and suggested a target price of Rs 275 on the stock compared with Rs 335 earlier, citing competition. The target suggests a limited upside ahead for the stock over its Monday's closing price of Rs 264.65 apiece.

Jefferies noted that the competition in quick commerce has increased, raising concerns over profitability. It sees a year of consolidation for the online food aggregator's stock, CNBC TV-18 reported. This is after a 98.76 per cent return delivered by the Sensex constituent in the past one year.

A likely higher discounting is seen as a threat to the medium-term profitability, as the brokerage trimmed its FY26-27 consolidated Ebitda estimates by 12-15 per cent and reduced its target multiple by half for Blinkit to 6 times.

Bernstein, however, has kept its outperform rating on Zomato Ltd and suggested a target price of Rs 335, citing leadership positioning in food delivery & quick commerce, strong user acquisitions, expanding TAM through Dine Out & other growth options.

"2025 will see amplification of quick commerce vs other channels. Top 40 – 50 cities constitute ~$250Bn of the overall grocery market. Quick commerce is uniquely positioned across proximity, pricing & selection & will continue to grow at 75-100 per cent YoY vs retail at low teens. We see Zomato as the biggest beneficiary," it said in a note on January 6.

Last week, Elara Securities said while several entrants have forayed into quick commerce, the success will depend on strengthening of key verticals, agile entry in expanding uses-cases, and offering of a wider variety at competitive prices.

"We expect Blinkit to maintain industry-leading position with higher AOV, larger assortments and higher take rates and not lose market share even as Swiggy’s Instamart is seeing traction recently," it said.

Anand Rathi, on the other hand, believes multiple players can co-exist in the quick commerce space. It initiated coverage on Zomato Ltd and Swiggy Ltd with 'Buy' ratings and 12-month target prices of Rs 385 and Rs 705, respectively.

In food delivery, the duopoly is well entrenched and cannot be shaken easily, it said. "Zomato leads in market share and revenue growth, thanks to a larger user base. However, Swiggy, with its relentless expansion plans in QC, launch of Bolt (10-minute FD service) and other new initiatives, remains a strong contender. We believe Swiggy would continue to lag Zomato but see its execution improving with accelerating growth and higher profitability," it said.

Anand Rathi said 90 per cent of the current QC contribution comes from the top eight cities due to mid-high-income households. Recently, all players have started expanding to Tier 2 & Tier 3 cities as well.

"This shows that the companies are focusing on undiscovered markets beyond the top eight cities to tap into its growth potential and cater to value buyers," it said.

Blinkit scaled its presence to 45-50 cities in two years, with its store count at 791 in Q2FY25. New stores are now being opened in cities like Kochi, Ajmer, Alwar, Nagpur, Vishakhapatnam, along with the latest openings in Lonavala, Khandala and Hisar. The target is to reach 1,000-plus stores by end-FY25 and 2,000 by end-2026, Anand Rathi said.

"Instamart currently has a presence in ~54 cities with the target of being present in 75 cities. They increased their dark stores count from 523 in FY24 to 609 in Q2FY25 with the aim to reach 1,000 dark stores by FY25 end," it noted.