Zomato Limited shares have dropped 17% from their December 2024 peak of ₹304.50, despite a recent 9% recovery. The decline has raised concerns among investors and sparked a debate on whether Swiggy could emerge as the better alternative. Here’s a closer look at what’s driving the fall and why experts still believe in Zomato’s potential.
What’s Behind Zomato’s 17% Decline?
Zomato’s stock has been under pressure due to its aggressive investments in Blinkit’s supply chain, including expanding dark stores and warehouses. Rising competition in the quick commerce (QC) segment has also contributed to investor anxiety.
However, analysts at JM Financial suggest the impact on Blinkit’s EBITDA margins may not be significant. They believe deviations from Zomato’s near-term break-even targets will likely be limited to 100 basis points and could be temporary.
Why Experts See Potential in Zomato
Despite the challenges, JM Financial considers the recent drop in Zomato shares an opportunity for long-term investors. Here’s why:
- Supply Chain Strength: Investments in Blinkit will improve its competitive edge against emerging rivals.
- Market Leadership: Zomato leads the quick commerce sector in terms of GOV, revenue, and profitability.
- Cash Flow Positivity: It is India’s only major hyperlocal delivery firm currently generating free cash flows without compromising growth.
- Execution Excellence: Zomato’s management has a proven track record of navigating competitive pressures effectively.
Swiggy or Zomato: Who’s Winning?
While Swiggy is a formidable competitor, Zomato’s dominance in market share, profitability, and execution gives it a significant edge. Long-term investors may prefer Zomato for its resilience and ability to balance growth with financial stability.
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