Shares of Zomato, India’s leading food delivery platform, hit a record high on Friday, marking a significant shift in investor sentiment.
Zomato shares surged on improved earnings outlook, highlighting a major departure from the tepid post-IPO performance of several new-age internet companies, Reuters reported.
Despite initial skepticism about the high valuation and business model, Zomato has become India’s most valuable Asian internet stock, with a market capitalization of over 1.51 trillion rupees ($18 billion).
“Investors are increasingly appreciating what Zomato is trying to do, and consumers are also liking the business model to a certain extent,” said Sachin Dixit, internet research analyst at JM Financial.
The company’s continued profitable growth and successful execution of its growth strategy have reversed investor sentiment, sending its stock price to new heights.
Zomato’s strong financial results have beaten market expectations for several consecutive quarters, setting it apart from peers facing profitability challenges.
Elara analyst Karan Taurani said Zomato’s “continued earnings improvement” and persistence on growth targets differentiated it from rivals that lack a clear path to profitability.
Although buoyancy was observed in Zomato’s trajectory, other players also encountered obstacles.
Once favored by the market, Nykaa faces macroeconomic challenges that signal a changing landscape for the industry.
In contrast, Paytm’s woes under regulatory scrutiny have translated into a sharp decline in its share price performance.
However, analysts confirm that Zomato’s dominance with more than half of the market share in the food delivery space continues to make it a formidable force.
Zomato’s acquisition of its fast commerce arm Blinkit in 2022 is expected to contribute significantly to its future growth trajectory.
Analysts expect Blinkit to achieve EBITDA (earnings before interest, taxes, depreciation and amortization) in the next fiscal year, further consolidating Zomato’s market position.
(With information from Reuters)