Zomato dips 5% as Jefferies downgrades firm to ‘hold’

The global brokerage firm revised the target lower, citing increasing competition as a threat to the online food aggregator’s profitability

Shares of Zomato declined around 5% in early trade on January 7, weighed down by global brokerage firm Jefferies’ downgrading its shares to ‘hold’.

At 11:58 am, shares of Zomato were down 4.36% to Rs 253.10 on the Bombay Stock Exchange (BSE). Earlier, the stock hit an intra-day low of Rs 251.55.

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Jefferies revised the target lower, citing increasing competition as a threat to the online food aggregator’s profitability. Although valuations appear reasonable considering Zomato’s strong execution and growth opportunities, Jefferies is “worried on the rise in quick commerce competition.”

The market capitalisation of Zomato has grown to Rs 2.55 lakh crore in the last 12 months, as its stock rallied by almost 100 per cent.

Jefferies has set a target price of Rs 275 per share from Rs 335 apiece earlier, as analysts expect a year of consolidation for the stock after it doubled in value in 2024.

Additionally, Jefferies sharply cut its EBITDA (earnings before interest, taxes, depreciation, and amortisation) forecast for Blinkit, Zomato’s quick-commerce arm, for fiscal years 2026-27.

The rapid rise of quick commerce in India is reshaping the retail landscape, with urban populations progressively seeking fast delivery services for daily necessities, according to GlobalData, a leading data and analytics company.

According to Grant Thornton Bharat Dealtracker, quick commerce fund-raising activity headlined in November, which otherwise witnessed a subdued activity as deals have been delayed/postponed to 2025.

November 2024 saw 163 transactions totalling $10.8 billion. The quick commerce space remained a bright spot, with notable fundraises by Zepto, Swiggy and Zomato. IANS