If you’ve been keeping an eye on Zomato, here’s some good news. Brokerage firm Bernstein has maintained its ‘Outperform’ rating on the stock, with a target price of ₹310. This comes as a breath of fresh air for investors who have been concerned about the intense competition in the online food delivery and quick commerce space. Let’s break down what this means for Zomato and its investors.
Why Bernstein is Bullish on Zomato
Bernstein believes that despite rising competition from players like Swiggy and Zepto, Zomato is well-positioned to maintain its leadership in the quick commerce segment. The brokerage notes that while marketing costs are increasing due to competition, companies are now focusing on profitability alongside growth.
Key Takeaways:
- Zomato is expected to retain its stronghold in quick commerce.
- Competition is likely to remain intense in the coming quarters, but Bernstein believes there’s a logical limit to price cuts, especially given Swiggy’s lower margin structure.
- The focus on profitability could lead to more sustainable growth in the long run.
E-Grocery Market: A Battle of Discounts
The e-grocery market is heating up, and Jefferies’ recent mystery shopping survey in Mumbai highlights the fierce competition. Here’s how the key players stack up:
- DMart Ready: Continues to offer the cheapest prices across most products and brands.
- Zepto Super Saver: Matches DMart Ready’s discounts in many categories and is focusing on increasing its average order value (AOV).
- Flipkart Minutes: Offers the cheapest products in the quick commerce segment, excluding Zepto Super Saver.
- BigBasket Now: Has increased its discounts since December 2024 and is now as aggressive as Blinkit and Zepto.
- Balancing profitability with competitive pricing will be a key challenge.
- The online food and grocery delivery sector is expected to see even more competition in the coming months.
- Companies will need to adopt more balanced strategies to sustain growth and margins.
Should You Invest in Zomato?
If you’re an investor, Bernstein’s bullish stance and the ₹310 target price might make Zomato an attractive pick. However, keep in mind that the sector is highly competitive, and profitability remains a concern in the short term. As always, do your research and consult a financial advisor before making any investment decisions.