Shares of online food delivery provider Zomato Ltd have zoomed over 80% in six months. The stock was trading in green today at around Rs 99.05, and was headed toward their fresh 52-week high of Rs 102.85, suggests technical analysis of the stock. The stock has risen around 16% since the firm announced its Q1 earnings on August 7, 2023.
Recently, Zomato introduced a Rs 2 platform fee on its food delivery app. The platform fee is levied per order, irrespective of the cart value, and applies to all users, including those enrolled in the Zomato Gold loyalty program. Brokerage firm Kotak Institutional Equities has estimated a Rs 40.50-crore contribution to Zomato's profit or EBITDA from the introduction of a platform fee of Rs 2 per order.
In the last one year, Zomato share price has rallied around 64%. Zomato reported a net profit for the first time in Q1FY24. The food delivery platform logged a profit after tax (PAT) of Rs 2 crore in the June 2023 quarter against a net loss of Rs 186 crore in the June 2022 quarter. The consolidated adjusted EBITDA of the company rose to Rs 12 crore, compared to EBITDA loss of Rs 152 crore in the year-ago quarter.
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According to Kotak Securities, expanding the business and cost management efforts are expected to lead these segments towards profitability in the coming quarters. In the case of Blinkit, Zomato has reduced the number of dark stores over the past 4-5 quarters. Additionally, there was a 149% YoY increase in revenue per store in Q1FY24, and the company is determined to achieve a positive contribution margin within the next 1-2 quarters.
"Focus on efficiencies in both Blinkit and Hyperpure can drive a faster-than-expected increase in profitability for the company. We upgrade our FY24-26 EBITDA estimates by 21-52% and FY25-26 EPS estimates by 97-177%. We note that over the past few quarters, bulk of the take-rate improvement has been driven by a restaurant take-rate increase and delivery take-rate has lagged," Kotak said. The brokerage house has maintained the 'buy' rating and revised its target price to Rs 110 from Rs 105 a share.
In terms of technicals, the relative strength index (RSI) of Zomato stock stands at 64.5, signalling it's trading neither in the overbought nor in the oversold zone. Zomato stock has a one-year beta of 1.63, indicating high volatility. Zomato stock is trading higher than the 5-day, 20-day, 50-day, 100-day and 200-day moving averages.
Gaurav Bissa, VP, InCred Equities, told Business Today, "Zomato witnessed a double bottom breakout on the weekly charts and confirmed the pattern after closing above the neckline placed at Rs 75 levels. Since then, the stock has been inching higher with formation of higher highs and higher lows implying the stock is in a strong uptrend. The stock has an immediate hurdle at Rs 100 levels and a close above this will trigger a breakout on candlestick charts as well as a bullish abc pattern follow through breakout, which can push the stock towards Rs 112 levels."
"Zomato is bullish but also overbought on the daily charts with next resistance at Rs 108.65. Investors should book profits at current levels as a daily close below the support of Rs 96 could lead to a target of Rs 87 in the near term," Abhijeet from Tips2trades told BT.
Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher said, “The stock has resistance zone near Rs 102 levels and would need a decisive breach above that zone for indicating a breakout and carry on the momentum still further ahead for next target of Rs 114-115 levels. The near-term support will be near Rs 90 and only a decisive breach below that would turn the trend weak.”
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