Zomato Soars to 52-Week High on Positive Analyst Ratings and Fee Increases

Zomato, a popular Indian food delivery company, saw its stocks reach a new high of Rs 137.5.

Reasons for the growth in recent times:

This was due to a positive outlook from global brokerage firm HSBC and other analysts' recommendations to "buy" the stock. HSBC raised its target price for Zomato to Rs 150, which is a 9% increase from its current value. While they expect the growth in 2024 to be muted, they still believe in the company's long-term potential.

However, they also recognize that Zomato's reliance on its expanding quick commerce business could pose a potential risk if growth in that sector slows down.

Elara Securities agrees with HSBC's assessment and also recommends buying the stock with a target price of Rs 150. They believe increasing convenience fees, advertising income, and restaurant commissions are key drivers for boosting it's profitability in the food delivery business.
They expect take rate expansion to continue in the coming years due to planned incremental convenience fee hikes.

Zomato recently increased its platform fee by 33% to Rs 4 per order in key markets, which has contributed to a quarter-on-quarter increase of 60 basis points and a year-on-year increase of 220 basis points in take rate (excluding delivery charges) during Q2FY24.

Analysts believe that this gradual increase in convenience fees is unlikely to significantly impact consumers since the charge represents only 0.9% of the average order value.

Conclusion :

Zomato's recent performance has been impressive and has generated a lot of positive buzz among industry analysts. Based on their current trajectory, it appears that the company has a bright future ahead.

By streamlining its business model and proactively addressing any potential challenges, it has positioned itself to continue its upward trend in the months to come.

Overall, the outlook for Zomato is very promising.