Jefferies downgrades to Hold on concerns over competition in flash trade By Investing.com
Investing.com- Jefferies downgraded the Indian food delivery company Zomato Ltd (NS: ) on Monday, saying the stock is likely to experience a year of consolidation after strong growth in 2024 due to increased competition and lower margins.
Jefferies downgraded Zomato to Hold with Buy, while lowering the price target to INR 275 from INR 335, representing an upside of around 5% from current levels.
Shares of Zomat slipped around 5% on Tuesday following a Jefferies downgrade, but were still poised for a 124% gain through 2024 as the food delivery company boosted profitability.
Jefferies said its biggest concern was increased competition in the convenience store sector, cutting its baseline earnings forecast for Zomato’s Blinkit unit amid rapidly growing competition from other brands in big cities.
While growth is not expected to be hampered by increased competition, given Blinkit’s dominance, profitability is likely to be squeezed, Jefferies said, given that Zomat’s competitors, such as Flipkart, Amazon (NASDAQ: ) and Reliance, are “deep-pocketed and they could face being forced to protect their turf.”
Jefferies warned that Blinkit may not be able to meet earnings expectations in the long term and cut its 2026 and 2027 EBITDA estimates.
