Zomato shares jump 5% to hit all-time high: what is pushing the stock?

Zomato share price: Zomato stock breached an all-time high record and traded at ₹173.50 a piece at peak.

Zomato share price: Zomato share price continued its upward trend for the second consecutive session during Friday's trade. At its peak, the stock surged by nearly 5 per cent, reaching a lifetime high of ₹173.50, compared to the previous day's closing of ₹165.50.

Zomato share price: Zomato stocks can be attributed to the company's robust financial performance, experts say. (Reuters Photo)

As of 3:30 pm, Zomato stocks were trading at ₹166.80 on the Bombay Stock Exchange and ₹166.50 on the National Stock Exchange.

What is driving the surge in Zomato stock prices?

The recent rally in Zomato stocks can be attributed to the company's robust financial performance, marking a significant turnaround, experts say.

Zomato, among the first new-age internet companies to go public during the 2021 IPO frenzy, initially faced investor concerns due to a limited track record of profitability and uncertainties about its strategic decisions.

However, with the company consistently surpassing expectations in its quarterly results, sentiment has undergone a complete reversal, according to Sachin Dixit, an internet research analyst at JM Financial.

Now, with the company's results trumping expectations for several quarters, sentiment has "completely reversed," Dixit said.

“Investors are incrementally appreciative of whatever Zomato is trying to do and there is a certain amount of consumer love for the business model too,” he added.

Zomato's "consistent earnings improvement" and adherence to growth targets set it apart, noted Elara analyst Karan Taurani.

It sets it apart from its peers who have "no clear path to growing profitability", Taurani said.

Nykaa, once a favourite among investors, faces macro headwinds, while Paytm, currently under regulatory scrutiny, has experienced a decline in its stock value.

Dominance to continue: Experts

With over half of the market share in food delivery, Zomato is anticipated to maintain dominance over IPO-bound Swiggy, as indicated by analysts.

Additionally, Blinkit, Zomato's quick commerce business acquired in 2022, is expected to achieve EBITDA positivity in the next fiscal year, serving as a growth lever for the company.

Zomato's impressive Q3 results

Zomato reported a net profit of ₹138 crore for the quarter ending December 31, 2023. This marked a substantial improvement compared to a consolidated net loss of ₹347 crore during the same quarter in the previous fiscal year.

The consolidated revenue from operations for Q3 stood at ₹3,288 crore, a notable increase from ₹1,948 crore in the corresponding period last year, according to Zomato's regulatory filing.

(Inputs from Reuters)