Zomato shares have set new lows for the second time in a row following the end of the mandatory pre-IPO shareholder’s lock-in period.
Zomato shares recovered from a two-day losing streak to rise more than 5% to 43 on the BSE in early trading on Wednesday. Zomato shares have set new lows for the last two sessions after the mandatory pre-IPO (Initial Public Offering) shareholders’ lock-in period ended on July 23.
Zomato shares made a stellar debut on the stock exchanges on July 23, 2021, but the stock has lost more than 65 percent of its value since then due to valuation concerns and as global growth stocks plummeted. The stock peaked at 159.75 in November 2021 and has since fallen amid a global tech stock crash.
Investors are also uneasy about Zomato’s recent acquisition of Blinkit (formerly known as Grofers) for $4,447 crore, which acted as a catalyst in the food delivery platform’s downward movement because Blinkit is a loss-making start-up.
Jefferies, on the other hand, is optimistic about Zomato stock. “Zomato management has accelerated its journey towards better unit economics and is now eyeing a break-even in the food delivery business in the foreseeable future,” it said in a note yesterday. The adjusted Ebitda losses for 4QFY22 were $30 million, with food delivery losses of $10 million. We expect this to improve quarter after quarter as management reduces its CAC by tapping into its MAU to drive MTU, reduces discounts, and increases take-rates, among other things.”
Despite a strong 30 percent compound annual growth rate (CAGR) over FY22-25E (well ahead of global/regional peers), Jefferies sees a consistent improvement in food delivery profitability.
The luster of new-age technology stocks is quickly fading. Share prices of all new-age fintech startups have plummeted significantly as a result of the ongoing market correction caused by the geopolitical crisis and interest rate hikes caused by inflation.
Zomato will release its first-quarter results on August 1. The company reported a 75% increase in fourth-quarter (Q4FY22) revenue, while gross order value (GOV), the total value of all food delivery orders on its online platform, increased 77% year on year.
