Zomato shares were under pressure on Monday, halting a three-day winning run, as investors awaited the release of the food delivery company's quarterly earnings. The Zomato stock fell by as much as Rs 1.8 or 3.8 percent to Rs 45.1 apiece on BSE — coming within Rs 5 of a record low hit last week.
Investors will closely watch out for the management's commentary on the path to profitability.
Zomato's financial results for the April-June period, due later on Monday, come amid wild swings in technology and platform stocks in the US with investors turning to profit-making companies amid steep hikes in COVID-era interest rates.
"Investor focus has decisively moved on losses or path to profitability across the Internet space and Zomato's 1Q (April-June) EBITDA loss would likely be the most important print that investors would be looking at," Jefferies said.
According to Jefferies, the recent fall of Zomato shares is led by both internal and external factors.
The April-June quarter could offer a much-needed trigger for Zomato shares at a time when pessimism is at its peak, the brokerage said.
Jefferies said a reduction in EBITDA loss is key for Zomato's upcoming earnings, followed by the trend in gross order value (GOV). The company had reported an EBITDA loss of Rs 449.7 crore for the January-March period, as against an EBITDA loss of Rs 153.5 crore for the year-ago period.
Zomato's GOV — or the total amount charged by a business for a customer's order including goods and delivery charges — has already clocked a record high in the quarter ended March.
It expects Zomato's GOV in the April-June period to be driven largely by the number of orders.
"While we do see a cyclicality in the growth of users, an increase in this number would be viewed positively," according to Jefferies.
The company's GOV in the March quarter was driven by healthy growth in order volumes and a stable average order value.
Jefferies has modeled in an eight percent sequential decline in loss led by better delivery economics.
The brokerage will also monitor the management's commentary on Blinkit losses and business momentum. "Should it disappoint, the stock is likely to break away from investors' radar," it said.
In June, Zomato announced the acquisition of Blink Commerce (Grofers) for Rs 4,447.5 crore in a share swap deal as part of its strategy of investing in the quick commerce business. Zomato shareholders have already approved the Blinkit acquisition.
Meanwhile, Zomato Founder and CEO Deepinder Goyal has mooted a new identity and mission for the company.
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