This foodtech stock has given a return of almost 200% in a year. Analyst expects 20% more upside

The buy rating comes on a stock that has given a return of 198% in the past year as against the benchmark Sensex which has risen 26% during the period. In 2024 alone (year-to-date) Zomato shares have made investors 28% richer as compared to Sensex which has gone up half a percent in the same time.

In its latest brokerage note, UBS has pointed out that industry volume is up 4% on a monthly basis, which is in line with seasonality. However, its question is whether a sequential or quarter-on-quarter decline in gross merchandise value (GMV) is possible for Zomato.

It said there might be some downside to consensus estimates and that it expects the food delivery firm to grow a percent on a quarter-on-quarter basis.

According to UBS, Zomato’s year-on-year growth shall remain healthy and within management’s guidance of 20%.

Of all the brokerages that have coverage on Zomato, 24 suggest buying the stock while four have given it a sell rating.

Jefferies has also called Zomato a "compelling food delivery play". Food delivery continues to offer strong growth potential and a stable industry structure should continue to drive profitability in the near term, Jefferies said. Zomato is also expecting an EBITDA break-even for Blinkit by June 2024. It is also expecting the profit pool of Zomato to become increasingly visible over the next five years. "As the franchise generates strong free cash flows, capital allocation will be a key factor to watch," a Jefferies note said.

Last week, HSBC raised its target price on Zomato to ₹200 with a focus on Blinkit. It believes that advertising revenues will be the backbone of quick commerce Blinkit business in the long term.

HSBC also expects Zomato’s digital spend share to increase in India and, within that, platforms to gain share thereby helping Blinkit. Within this spend, the brokerage expects the share of digital to increase from 38% currently to 44% by FY27e. Many digital marketers believe this share could go up even higher, it said citing an IPSOS State of Marketing report.