Jefferies Downgrades Zomato to 'Hold' Amid Rising Quick Commerce Rivalry
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New Delhi, Jan 7 (NationPress) Global brokerage firm Jefferies has revised its stance on Zomato's shares, downgrading them to 'hold' and lowering the target price, as they identify intensifying competition as a significant risk to the online food aggregator's profitability.
While valuations may seem reasonable given Zomato's robust execution and growth potential, Jefferies expresses concern over the escalating competition in the quick commerce sector.
The new target price has been adjusted to Rs 275 per share, down from Rs 335, as analysts anticipate a period of consolidation for the stock following its nearly 100% increase in value during 2024.
Furthermore, Jefferies has significantly reduced its EBITDA projections for Blinkit, Zomato's quick-commerce segment, for the fiscal years 2026-27, also slashing its target multiple for Blinkit to six times.
Over the past year, Zomato's market capitalization has surged to Rs 2.55 lakh crore, with the stock nearly doubling in value.
In contrast, Anand Rathi Share and Stock Brokers Ltd. has commenced coverage on both Zomato and Swiggy, assigning a 'buy' rating as these companies expand their offerings beyond food delivery to capture a larger slice of the burgeoning intracity e-commerce market.
With the rapid growth of the quick commerce industry, the food take-away segment in India is projected to achieve a compound annual growth rate (CAGR) exceeding 7.7% during the period from 2023 to 2028.
The swift ascent of quick commerce in India is transforming the retail landscape, as urban populations increasingly demand fast delivery services for everyday essentials, according to GlobalData, a prominent data and analytics company.
According to Grant Thornton Bharat Dealtracker, fundraising activities in quick commerce gained prominence in November, amidst a generally subdued activity where many deals were postponed to 2025.
Notably, November 2024 recorded 163 transactions totaling $10.8 billion, with the quick commerce sector standing out, highlighted by significant funding rounds for Zepto, Swiggy, and Zomato.
