Swiggy Receives Its First 'Sell' Rating from Ambit Capital Since Listing
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Synopsis
On April 23, 2024, Swiggy Limited was assigned its first 'sell' rating by Ambit Capital since its listing in November 2024, citing concerns over its declining market position in food delivery and quick commerce services.
Key Takeaways
- Swiggy's first 'sell' rating since listing.
- Target price set at Rs 310, over 20% drop forecasted.
- Now ranks 2nd in food delivery, 3rd in quick commerce.
- Instamart struggling against Blinkit and Zepto.
- Ambit warns of limited market reach for Instamart.
New Delhi, April 23 (NationPress) Swiggy Limited has been assigned its inaugural 'sell' rating since its public listing in November 2024, as analysts express concerns regarding its declining status in the sectors of food delivery and quick commerce services.
A recent analysis from Ambit Capital indicates that Swiggy has forfeited its initial advantage in these markets, now positioning itself as second in food delivery and third in quick commerce.
Ambit Capital has initiated coverage on Swiggy with a cautious approach, establishing a target price of Rs 310 per share. This projection implies a potential decrease of over 20% from the company's latest trading price.
In the food delivery arena, Swiggy is currently outperformed by its rival Zomato, which boasts a wider reach, a greater user base, and increased order volumes, as per the report.
Despite a slowdown in the rate at which Swiggy is losing market share, Ambit anticipates that its share will stabilize around 42% in the long term.
Swiggy's quick commerce arm, Instamart, is also encountering challenges. Once the predominant player in this sector, Instamart has now slipped behind Blinkit and Zepto.
Ambit highlights that Instamart's reachable market is confined to merely 30 to 50 cities. It also criticized Swiggy's over-reliance on advertising revenues and its failure to adequately gauge the competition.
The report suggests that Instamart requires substantial investment to compete with rivals across various domains, including product diversity, store efficiency, customer acquisition, and advertising outreach.
Though JPMorgan recently noted that Swiggy is expanding its store count and gradually closing the gap with Zepto, Ambit remains more reserved in its outlook.
A significant factor contributing to Instamart's downturn is its delayed reaction to the industry's trend towards 10-15 minute deliveries.
While competitors like Blinkit and Zepto prioritized rapid delivery speeds from the outset, Swiggy initially adhered to a 30-minute delivery framework.
Additionally, it faced challenges with a limited product assortment and sluggish marketing initiatives. According to the report, Swiggy is now contending with intense competition across all sectors.
