Zomato Shares: Morgan Stanley Sees 75% Upside In Bull Case
Shares of food delivery major Zomato Ltd. may soar by up to 75% over the next year in a bull case scenario, according to a note issued by Morgan Stanley.
The stock could rise up to Rs 510 apiece, the global broking firm said on Wednesday. This suggests a potential upside of 75% as compared to the day's closing price.
Under the bull case scenario, however, Morgan Stanley assumes that the "online food delivery market reaches $23 billion in fiscal 2027, representing 25.7% of India's food services market.".
In the bear case, Morgan Stanley sees Zomato rising to Rs 310 per share over the next year. This suggests a modest upside of 6.2%.
Under this scenario, the broking expects the online food delivery market to reach $16 billion in fiscal 2027, representing 21.5% of India's food services market.
On the flip side, Morgan Stanley sees a possible dwindling of Zomato's stock to Rs 160 per share in a bear case scenario. This suggests a potential downside of 45%.
The bear case projection comes with the assumption that the online food delivery market reaches only up to $13 billion in fiscal 2027, representing 14.4% of India's food services market, the note stated.
Morgan Stanley sounded bullish on Blinkit, the quick commerce arm of Zomato, even as it pointed towards the rising competition in the sector.
"Superior unit economics, a stronger balance sheet, and strong positioning within consumers should keep Blinkit's market share above 40%," the broking said.
Blinkit is currently the market leader in the quick commerce segment but faces increasing competition from emerging players such as Zepto and Dunzo, as well as from rival Swiggy, which is bullish on its grocery delivery arm, Instamart.
"Based on our conversations with investors, we think the market is concerned about rising competition in the QC business," Morgan Stanley said. The broking, however, added that it sees Blinkit as "well positioned to maintain market share and get to a $1 billion profit pool by 2030.".
Shares of Zomato on Thursday closed 2.86% lower at Rs 284.9 apiece on the BSE, compared to a 0.29% decline in the benchmark Sensex.
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