Morgan Stanley has reiterated its confidence in the Indian food delivery company Zomato, maintaining an "Overweight" rating and setting a price target of ₹140. This target suggests a significant upside potential from the current share price, which settled at ₹112.80 on the National Stock Exchange (NSE) on Thursday. The optimism from Morgan Stanley is anchored in the expected increase in usage by mature users and higher online spending, particularly in the quick commerce segment.
Zomato's financial performance in the second quarter ending September 2023 reflects a positive trajectory, with the company reporting consolidated profits after taxes of ₹36 crore. This marks a substantial improvement from the same period last year. Revenue streams also showed robust growth, jumping to ₹2,848 crore from ₹1,661 crore year-over-year. However, operational expenses concurrently rose to ₹3,039 crore (INR100 crore = approx. USD12 million).
Investors in Zomato have witnessed impressive returns of over seventy-five percent in the past six months, despite the recent dip in share price. The company's strong revenue growth is attributed to its solid performance in the food delivery sector, which continues to drive profitability and investor optimism.
Morgan Stanley's outlook indicates that Zomato's strategic focus on quick commerce and leveraging its established user base could further enhance revenue and operational efficiency, contributing to the company's continued growth and success in a competitive market.
InvestingPro Insights
In light of Morgan Stanley's optimistic view of Zomato, InvestingPro data and tips offer additional perspectives on the company's financial health and market performance. Real-time data from InvestingPro highlights that Zomato's revenue growth has been accelerating, which aligns with the robust growth figures reported in the second quarter ending September 2023. This acceleration is a positive sign for potential investors, reinforcing Morgan Stanley's confidence in the company.
InvestingPro Tips suggest that Zomato holds more cash than debt on its balance sheet, providing the company with a strong financial position to navigate market uncertainties and invest in growth opportunities. Additionally, analysts anticipate sales growth in the current year, which could further buoy investor sentiment and share price.
InvestingPro also notes that Zomato is a prominent player in the Hotels, Restaurants & Leisure industry, which may contribute to its resilience and potential for long-term success. For those looking for more comprehensive analysis, InvestingPro offers a total of 16 tips on Zomato, available exclusively to subscribers. Currently, there's a special Black Friday sale, offering a subscription discount of up to 55% for those interested in deepening their investment research.
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