Jefferies hits ‘buy’ button on Zomato for long-term investors

As food delivery platform Zomato saw its stock tumbling to an all-time low, global brokerage and research firm Jefferies has said it is time to buy as the stock can be a good entry point for long-term investors.

Zomato share price tanked over 11 per cent on Monday and another 7 per cent on Tuesday to hit an all-time low of Rs 44.10.

In a note, Jefferies said that now is the time for long-term investors to Buy Zomato stock with a target price of Rs 100.

“Zomato management has also accelerated its journey towards better unit economics and is now eyeing a break-even in the food delivery business in the foreseeable future,” the note read.

The online food delivery giant’s stock has fallen more than 69 per cent this year.

“Zomato is now unloved, having underperformed peers ytd. Blinkit acquisition elongates path to profitability and despite management guidance on a break-even in food delivery, investors are not giving much benefit of doubt,” Jefferies said in its note.

“The only exception to mgmt’s conservative stance is its decision to buy Blinkit, which may be driven by FOMO or protect its food delivery turf, as highlighted post acquisition. Time horizon is probably longer for the mgmt. as against investors as this business will likely be a cash guzzler in the medium term,” said the global brokerage and research firm.

“Zomato itself has guided for $400m of investment over the next two years. This remains a medium-term concern for investors as this would weigh on company profitability,” Jefferies added.

Zomato shares fell to their lowest levels on Monday since the IPO was launched at Rs 76 per share as the one year lock-in period for investors considered insiders has ended.

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