Zomato Shares Plunge 13% After Earnings Miss Analyst Estimates

Zomato Limited, India's leading food delivery and restaurant discovery platform, witnessed a significant drop in its share price on Monday, January 21, 2025, following the release of its December quarter earnings. The company's shares fell by over 13% to ₹223.40, marking a 7.82% decline from the previous day's close. This sharp decline can be attributed to the company's earnings missing analyst estimates, highlighting the challenges Zomato faces in maintaining its growth momentum.



Zomato reported a net profit of ₹59 crore for the quarter ended December 31, 2024, a 57% year-on-year (YoY) decline from the ₹138 crore reported in the same period last year. The company's revenue from operations climbed 64% YoY to ₹5,404 crore, from ₹3,288 crore in the same period last year. However, the earnings miss raised concerns about the company's profitability and growth prospects.



The earnings miss can be attributed to several factors, including aggressive store expansion in its Blinkit dark store network, increased competition, and a slowdown in food delivery growth. Zomato's quick commerce segment, Blinkit, reported a significant loss in the quarter, primarily due to increased investments in expanding its store network. The company's food delivery business also faced headwinds, with Gross Order Value (GOV) growth slowing down sequentially.

Analysts have responded to Zomato's earnings miss by revising their price targets and recommendations. Jefferies maintained a 'Hold' rating on Zomato but reduced its price target to ₹255 from ₹275 per share earlier. Macquarie maintained an 'Underperform' recommendation on Zomato, with a price target of ₹130, citing competitive intensity weighing on profitability. Nomura, on the other hand, retained a 'Buy' rating with a price target of ₹290 per share, highlighting Zomato's strong execution and healthy balance sheet.



In conclusion, Zomato's earnings miss has led to a significant drop in its share price, raising concerns about the company's profitability and growth prospects. However, the company's strong execution, healthy balance sheet, and aggressive expansion plans may help it overcome these challenges in the long run. Investors should closely monitor Zomato's performance and consider the company's growth prospects before making any investment decisions.