Zomato share price plunges over 9% after Q3 PAT slumps 57% YoY. Time to buy or sell?

Zomato share price slumped over 9% in Tuesday's session following weak results for the December 2024 quarter (Q3). 

Zomato on Monday announced that its consolidated net profit for the December quarter fell by 57.2% to ₹59 crore, as its margins were impacted by rapid store expansion to accommodate orders from its quick-commerce service, Blinkit. In the same period last year, the company reported a net profit of ₹138 crore.

Zomato reported a 2% increase quarter-on-quarter and a 17% rise year-on-year in food delivery revenue, attributed to a widespread "demand slowdown," as mentioned in a letter to its shareholders. 

The company's consolidated revenue from operations reached ₹5,405 crore, compared to ₹3,288 crore in the December quarter of the previous fiscal year. Total expenses also surged to ₹5,533 crore, up from ₹3,383 crore during the same period of 2023-24.

Zomato share price today opened at ₹223.10 apiece on the BSE. The stock touched an intraday high of ₹227.05 and an intraday low of ₹219 per share. 

Zomato Stock: Time to buy or sell?

Here's what brokerages and analysts said on Zomato stock following its earnings announcement:

Tech View

According to Osho Krishan, Sr. Analyst, Technical & Derivatives, Angel One, Zomato experienced a significant decline of nearly 8 per cent after the release of its Q3 earnings report.

This downward movement caused the stock price to fall below 200 SMA on the daily chart, accompanied by the formation of a strong bearish candlestick. From a broader technical perspective, the stock has broken down from a 'Double Top' formation, raising concerns about the potential for further corrections in the near term.

The next visible support is seen around the 200 subzones. Meanwhile, if the stock can manage to break decisively above the resistance levels between 245 and 250, it could invalidate the current bearish formation and restore some bullish sentiment among investors. However, until such a breakthrough occurs, the outlook remains cautiously negative, with the possibility of further declines looming in the background, believes Osho.

Fundamental View

Nuvama Institutional Equities

The brokerage's report indicates that the growth of Blinkit's dark store additions is exceeding expectations, contributing to accelerated growth, although profitability might experience temporary setbacks due to increased initial expenses for opening stores.

Nuvama anticipates that this accumulation of costs for adding dark stores will negatively impact short-term profitability, but it will eventually lead to a consolidation of profitability in upcoming quarters as these stores reach maturity. It maintained a 'BUY' rating with an updated sum-of-the-parts based target price of ₹300 (previously ₹325) as they transition to their FY27 projections.

Motilal Oswal Financial Services

“Zomato's food delivery business is stable, and Blinkit offers a generational opportunity to participate in the disruption of industries such as retail, grocery and e-commerce. We value the business using a DCF methodology, assuming a 12.5% cost of capital. We maintain our BUY rating with a target price of ₹270, implying 13% potential upside,” the brokerage said.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.