Zomato shares were under pressure, down as much as 2 percent on Wednesday, ahead of its quarterly results. The company is slated to announce its earnings for the September quarter today.
At 12:35 pm, Zomato shares were down 0.4 percent at Rs 136.95 on the BSE. In the past three months, the stock has gained 9 percent whereas the Nifty500 index has risen 11.5 percent.
Even though Zomato's business model is asset-light and forward-looking, and prospects are strong, the company's share price has certainly run ahead of its growth prospects, said Purvesh Shelatkar, head of institutional broking at Monarch Networth Capital.
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Shelatkar believes that there are better stocks to buy at this point in time where there is clarity over profitability.
The benefit of domestic economy reopening gradually is expected to be reflected in today's earnings, Shelatkar added.
In mid-September, JP Morgan had initiated coverage on shares of Zomato with an 'underweight' rating and a price target of Rs 120. The foreign brokerage had said that the food delivery platform's stock is trading at a substantial premium to global peers.
Besides the earnings announcement, there was a media report stating that the food delivery platform now wants to model itself after one of its early investors and largest shareholders-Info Edge.
Zomato is looking to make financial investments to the tune of $50-$100 million in a clutch of startups over the next few quarters, said the report. The company wants to build a diverse investment portfolio and tap into the growing internet market in India, the report added.
Earlier this week, there was another media report which said that Zomato is in advance talks to invest in logistics aggregator Shiprocket in a $200-million round.
The startup that was listed earlier this year, is likely to invest around $75 million in Shiprocket and is looking to diversify its bet in the logistics space with this investment.
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