Zomato shares plunge 5% post Q3 results. Should you buy, sell or hold?


Zomato’s Q3 loss narrowed, helped by a one-time gain, while revenue jumped due to increased demand for restaurant meals. The food delivery platform reported a consolidated net loss of 67 crore, boosted by a one-time gain of 315.8 crore from the sale of stake in sports platform Fitso. Shares of Zomato plunged about 5% on the BSE at 89 apiece in Friday’s opening deals.

The company’s consolidated revenue from operations during October-December 2021 stood at 1,112 crore as against 609 crore in the year-ago period. Its gross order value (GOV) grew 84.5% YoY and 1.7% QoQ to 5,500 crore. 

“We believe that with its organic and inorganic initiatives and a well-funded balance sheet, Zomato remains the best play in the fast-growing F&B market. While short-term investors may feel disappointed, we believe that Zomato will reward long-term investors handsomely,” said Abhay Agarwal, Founder, and Fund Manager, Piper Serica, SEBI Registered PMS.

Zomato attributed the weak QoQ growth in GOV due to reduction in customer delivery charges, in addition to a soft impact of post-covid reopening.

“Declining Contribution with weak growth in GOV suggests that the growth is getting softer while cost pressures are not moderating. This along with further allocation of 5.5 bn on minority investments is straining cash-flows and thus resulting in cut in our DCF value. Maintain Sell rating with target price of 75,” said analysts at Dolat Capital in a note.

Zomato raised 8,728 crore via its initial public offering (IPO) in July. It has used 3,267 crore as of 31 December, it said in its financial statement. Zomato shares are down about 33% in 2022 (year-to-date) so far.

“Zomato stock has corrected sharply after making a high of 169 level in November . Now, below expectation results may put some more pressure in the stock. We are expecting it may correct till 82-80 levels. However, on the charts, it has a strong support around 70 to 75 levels. Investors can wait for these support levels to buy in the stock,” said Anuj Gupta, Vice President at IIFL Securities.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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