Zomato Shares Gain Undeterred By Q1 Loss
Shares of Zomato Ltd. gained even as the company’s quarterly loss widened on account of employee stock options issued to the founder.
Net loss for the restaurant discovery and food delivery platform stood at Rs 356 crore in the quarter ended June against a loss of Rs 153.5 crore in the preceding three months, according to an exchange filing. Its revenue, however, rose sequentially.
Jefferies raised its FY22-24 revenue estimates for Zomato by 10-20% but is disappointed with the lack of disclosures by the company on key metrics such as average order value, unit economics and estimated number of orders during the first quarter.
Zomato, however, has said it would only do analysts/earnings calls once at the end of the financial year, and would address the most pertinent/frequent questions through blogs or quarterly shareholder reports.
Shares of Zomato rose as much as 5.4% as of 11:00 a.m. on Wednesday compared with a 0.58% decline in the NSE Nifty 50 index. Of the six analysts tracking the company, four recommend a ‘buy’, and two have a ‘sell’ rating, according to Bloomberg data.
Here's what brokerages have to say about Zomato after its first-quarter FY22 results:
Maintains ‘sell’ with a target price of Rs 90, implying a downside of 28% from Tuesday’s close.
Order growth accelerates, and so does losses.
Underlying business metrics are performing well.
Declining contribution despite robust improvement in average order value and order growth suggests growth is more pushed through subsidies, which in turn increases magnitude of losses.
Increased burden from ESOP cost would mean no near-term operating leverage either.
Given strong growth performance in Q1, scaled up revenue estimates by 10% in FY22.
Maintains ‘buy’ with a target price of Rs 175, implying a upside of 40% from Tuesday’s close.
Reported revenue grew strongly QoQ with revenue including delivery fees rising more than 25% QoQ.
Raises FY22-24 revenue estimates primarily based on higher gross order value.