Zomato share price dips over 16% in one month. Buy or wait for more correction? | Stock Market News

Zomato share price has fallen by approximately 16% over the past month, presenting a buying opportunity, according to analysts.

JM Financial, a domestic brokerage firm, points out that recent negative sentiment presents a chance for long-term investors. The brokerage notes that Zomato’s stock is now trading around 21% lower from its all-time highs, influenced by increasing investor worries regarding heightened investments in Blinkit’s supply chain and escalating competition in quick commerce.

“While these concerns have merit, we believe the impact on Blinkit’s adjusted EBITDA margin (as % of GOV) may not be meaningful, and the deviation from near-term guidance of break-even levels will be limited to ~100bps. Further, we believe supply chain investments should help Blinkit better compete with emerging competition,” added the brokerage.

The brokerage also mentioned that Zomato is the most robust company in the quick commerce sector, and thus, they strongly recommend that long-term investors take advantage of the recent market pessimism regarding the stock to establish significant positions.

“We continue to assign a target multiple of 75x on Zomato’s Mar’27 EPS to derive an unchanged target price of ₹300. Zomato continues to be one of our preferred picks in the listed Internet space. We maintain ‘BUY’,” the brokerage said.

Global brokerage CLSA has expressed a similar positive outlook for the stock by recently including Zomato in its High Conviction O-PF list, noting that the recent decline in the stock price presents an excellent chance to invest in the leading player in quick commerce and food delivery.

“We revise our target price from ₹370 to ₹400 to reflect the faster growth, more category additions and faster store adds. We raise our net profit estimates by 2-12% to reflect this and also the recent fund raise. We add Zomato to our High Conviction O-PF list to reflect our positive view on the quick sector and Zomato’s leading position,” said CLSA in its report.

Q3 Results

On Monday, January 20, Zomato will release its Q3 earnings for the quarter that ended on December 31 (Q3FY25).

Zomato’s profit after tax (PAT) increased fivefold to ₹176 crore in the second quarter of the fiscal year 2025 (Q2FY25) from ₹36 crore in the same period the previous year. However, PAT decreased by 30% from Q1FY25’s ₹253 crore.

From ₹2,848 crore in Q2 FY24 to ₹4,799 crore in Q2 FY25, Zomato’s operating revenue increased by 69% year over year (YoY). Its revenue for the preceding quarter was ₹4,206.

Technical Views

Zomato share price rose 3.6% in Friday’s session. The stock opened at ₹245.05 apiece on the BSE. Zomato share price touched an intraday high of ₹250.75 and an intraday low of ₹240.65 per share. Technical analysts hold mixed views on the stock, anticipating a bullish to range bound and even bearish trend in the near term.

According to Riyank Arora, Technical Analyst, Mehta Equities, Zomato share price is appearing to bounce from its immediate support levels of 240 indicating signs of reversal coming in from lower levels. 

“A major support is placed near 226 mark. Overall, we advise investors to hold on to their positions with a strict stop loss of 235 for potential targets of 260 and 265. We believe the pain should take a pause and stock should reverse from here and head higher,” said Arora.

Further Sachin Gupta, Senior Research Analyst at 5paisa added on a weekly timeframe, the stock has formed a Double Top pattern, which is considered a bearish signal. However, the stock has found immediate support around the 226 levels, coinciding with the 50-week Exponential Moving Average, noted Gupta. On the daily chart, the stock is holding above the 200-day Simple Moving Average, with a positive crossover in the Relative Strength Index, indicating a potential recovery, according to the analyst.

“Given this mixed technical setup, we expect a range-bound momentum in Zomato over the coming days. The stock is likely to trade between the 240-260 ranges, with a breakout in either direction determining its next move. Therefore, traders are advised to monitor these levels closely. If the stock falls below 240, bears may take control, pushing the price down to 210-200 levels. Conversely, if the stock sustains above 260, it could potentially retest the prior swing highs around 300,” said Gupta.

However, Aashish Shetty, Research Analyst- Technical, Axis Securities, said Zomato shares could potentially decline more and reach the ₹195-200 range, which corresponds to the 61.8% Fibonacci retracement level of the rally observed between late June and late September. For the sentiment to turn bullish, the stock would need to deliver a convincing close above the ₹275 mark, which could signal a shift in momentum and renewed investor confidence, he added.

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.