Zomato shares jump nearly 8% as JP Morgan lifts target price to ₹340, projects 40% upside

After a brief pullback in recent sessions, Zomato shares surged 7.7 percent in early morning trading today to ₹261.60 per share. This surge came after global brokerage firm JP Morgan raised its target price for the stock from ₹208 to ₹340 per share, while continuing its 'overweight' rating.

This marks the second-highest target price for Zomato, following CLSA's earlier revision to ₹353 per share, where it maintained an "overweight" rating on the stock.

Blinkit's expansion drive

JP Morgan's revised target price indicates a 40 percent upside from the stock's last closing price of ₹242 per share. The brokerage attributed its bullish outlook to Zomato's expansion of Blinkit, which has been successfully scaled across all major metro cities after demonstrating its viability in the NCR region.

The brokerage anticipates Blinkit’s scale will significantly boost monetisation through channel margins and advertising revenue. Moreover, improved store-level economics are expected to enhance the company’s EBITDA outlook further, it said.  

JP Morgan believes Blinkit is poised to disrupt both modern trade and e-commerce. As a result, the brokerage has raised its FY25-27 forecasts by 15 percent to 41 percent. Additionally, it has factored in a larger “Going Out” business, which now combines core dining with Zomato’s newly acquired ticketing venture.

CLSA, on the other hand, has named Zomato as its top consumer pick in India due to its rapid growth and Blinkit's increasing market share. The brokerage believes Zomato will be the primary beneficiary of the transformation in India's supply chain driven by quick commerce. CLSA anticipates that Blinkit will achieve profitability in FY25.

It noted that despite the expansion of stores, Blinkit's profitability continues to improve, which enhances the expectation that it could become more profitable than Zomato's food delivery segment alone.  

The brokerage has raised its target price for Zomato but has reduced its FY26 profit estimates by up to 12 percent to account for the company's acquisition of Paytm's ticketing business.

Blinkit, Zomato's quick-commerce arm, reported an adjusted EBITDA loss of ₹3 crore in Q1FY25 but exceeded its store addition guidance by adding 113 new stores.

UBS, Jefferies, Morgan Stanley, and Nomura raise Zomato target prices

In recent months, global brokerage firms have revised target prices on Zomato, with UBS recently raising its target to ₹320 per share, up from the previous target of ₹260 per share. The brokerage attributed this revision to the company's better-than-expected June quarter results, driven by a stronger-than-anticipated 27 percent growth in gross merchandise value (GMV) for quick commerce and solid performance in food delivery.

Jefferies has also adjusted its target price on Zomato to ₹275 apiece, maintaining a ‘buy’ rating.

Morgan Stanley has reaffirmed its “overweight” rating on Zomato and set a target price of ₹278 per share.

In addition, Nomura has increased its target price for Zomato to ₹280 from ₹225 earlier this month while maintaining a “buy” recommendation. It highlighted Zomato's substantial growth potential and improving profitability in both its food delivery and quick commerce segments.

The firm projects Q-commerce will grow by 100 percent to 110 percent annually during FY25-FY26, with Zomato approaching EBITDA breakeven at -0.1 percent and forecasting a +1.1 percent margin for FY25. Zomato's strong growth trajectory and improving profitability make it an attractive investment opportunity in the Indian market.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.