Zomato’s shares rallied seven percent to soar past Rs 100 on August 7, after a stellar 10 percent jump in the previous trading session as the foodtech platform turned profitable for the first quarter ever.
At the day’s high, Zomato’s share price touched Rs 102.85 on BSE. This is the first time since January 25, 2022 that the stock has surged past the Rs 100 mark. In the past six months, the food delivery platform’s shares have given a return of 106 percent to investors as against the benchmark Sensex, which rose over nine percent during the period.
Zomato turned profitable for the first time during the June quarter of this fiscal. The profitability was aided largely by operational improvement in the company's food business as its food delivery margins rose to 13.6 percent.
The firm’s consolidated net profit of Rs 2 crore for the first quarter if the fiscal came against a net loss of Rs 186 crore in the year-ago three month period. The
consolidated revenue from operations surged 71 percent year-on-year to Rs 2,416 crore, compared to Rs 1,414 crore in the corresponding quarter of last fiscal.
Reflecting on the Zomato stock rally, InCred Equities’ vice president Gaurav Bissa said the stock has been forming higher highs and higher lows on the daily charts since January 2023, implying a short term trend reversal.
He advised investors to buy the stock on declines towards Rs 80 for a target price of Rs 120 to Rs 140 whereas existing shareholders can use Rs 75 as trailing stoploss.
Lead Research Analyst at 5paisa.com, Ruchit Jain, pointed out that the Zomato stock has been forming a 'Higher Top Higher Bottom' structure and is thus in an uptrend.
“The stock also witnessed high volumes post its results which indicates buying interest in the stock. However, traders are advised to look for buying opportunities on declines rather than chasing the prices at higher levels. The immediate supports for the stock are placed around Rs. 92 and Rs. 89,” he said.
Meanwhile, Astha Jain Shah, research analyst at Hem Securities on Friday told CNBC-TV18 that it seems whatever Zomato did in the past, for instance its move to acquire Blinkit, etc., has now started to pay results.
According to her, this stock has the potential to move upside. "Maybe we can see the stock prices rise 10 or 15 percent more from the current level (on Friday). Zomato is looking strong to us and I think buying on dips is a strategy which we can recommend at this stage," she said.
Technical analyst Mitessh Thakkar too had noted that Zomato, which was already witnessing an uptrend, picked up fresh momentum post earnings.
He revised his target for Zomato levels of around Rs 120 as he belives there's still more upside left if one looks at long term charts.
"In the short term, you might want to accumulate it slowly given the fact that the stock has been rallying for many days and a good entry point will be around Rs 86-87 levels and the stop loss will be below 80. I think eventually setting towards Rs 120 plus levels," he said on August 4.
An independent market expert Kush Ghodasara said Zomato's focus on improving margins and implementing a B2B module bodes well for its future prospects.
"With a near duopoly in the market, holding the highest market share, Zomato is in a favorable position. The expansion into Tier 2 cities and continuous addition of new cities further contributes to its promising outlook.
Zomato's instant grocery app Blinkit too is gaining popularity, leading to reduced losses, he said, adding that this success in the grocery delivery segment could potentially drive significant profit growth in the upcoming months.
"From a technical perspective, Zomato's breakthrough above the resistance level at 85 on the weekly chart after a year is noteworthy, especially with strong trading volumes supporting the rally. The bullish crossover of technical indicators indicates a positive trend. Investors may consider purchasing Zomato's stock at the current market price (CMP) with a target of 165 and setting a stop loss at 83."
