Morgan Stanley has recently revised its target price for Zomato, bullishly predicting a potential 31.7% upside, lifting its estimate to Rs 355 per share from the previous Rs 278. This positive outlook stems from Zomato’s strong execution in the food delivery sector and its growing presence in the quick commerce market, which has become a significant force in India’s retail landscape.
The global brokerage firm emphasizes Zomato’s advantageous position, highlighting the company’s robust balance sheet and the estimated profit pool it could tap into by 2030. Morgan Stanley’s report underscores the rising share of quick commerce in India and the broader implications for food delivery services. This advantage is expected to propel Zomato’s growth trajectory, especially as competition intensifies in the quick commerce segment, dominated by companies like Blinkit.
Zomato’s strategic focus on convenience is transforming into a dual approach aimed at enhancing both price competitiveness and selection variety. Morgan Stanley forecasts the potential size of the quick commerce market in India to reach between $42 billion and $55 billion by 2030, depending on market conditions. This shift positions Zomato to maintain its approximately 40% market share, despite the influx of competitors.
Analysts see several key drivers for Zomato’s stock performance. Morgan Stanley anticipates that significant investment in aggressive expansion will lead to a breakeven adjusted EBITDA within the next two to four quarters. This projected outcome hints at substantial incoming revenue, with expected profit margins of 2.2% by fiscal year 2027 and potentially rising to 5.1% by fiscal year 2031. The annual profit pool anticipated for this booming business model could approach $1 billion.
In a rapidly evolving market, keeping pace with competitors will require Zomato to continually refine its pricing tactics and product offerings. The brokerage firm mentions that while the company’s current focus on convenience addresses immediate consumer needs, it must also adapt to shifts toward greater price sensitivity and selection hurdles.
Moreover, Zomato’s competitiveness in the food delivery industry contributes to its market leadership in quick commerce, enhancing its overall unit economics. The model of integrating additional business lines, such as Hyperpure and the “Going Out” service, represents pathways for sustainable growth amidst a changing market landscape.
Morgan Stanley recognizes concerns surrounding potential risks. The competitive landscape in quick commerce is intensifying, and external pressures such as urban consumption slowdowns and regulatory challenges affecting gig workers’ rights could impact Zomato’s performance. Despite these risks, the expected steady increase in consumer demand for delivery services reinforces a favorable sentiment toward Zomato’s stock.
Zomato’s recent stock performance reflects this growing optimism. Following Morgan Stanley’s announcement, shares of Zomato rose by 4.3%, closing at Rs 269.60 on the Bombay Stock Exchange. This uptrend confirms investor confidence in the company’s strategic execution and prospects for future profitability.
As the market evolves, Zomato appears well positioned to leverage advancements in the quick commerce space, ushering in a new era of convenient food delivery options. By adapting its business model to address competitive pressures while capitalizing on rapid consumer shift trends, Zomato stands to harness considerable growth and expand its market influence in the coming years.
Observing the trend of quick commerce’s rapid growth and the increasing role of delivery services in retail, Zomato’s strategic positioning makes it a noteworthy player in the larger e-commerce landscape. As noted in Morgan Stanley’s report, the advantages derived from Zomato’s operational strengths and market leadership position emphasize its potential as both a valuable investment and a vital component in the future of India’s retail ecosystem.