Zomato shares a 9% decline despite narrowing losses in the third quarter. What should investors do now?

Zomato shares plunged about 9% in Friday’s opening trades. The food delivery company, which reported third-quarter profits, pared losses, helped by a one-time gain, while revenue jumped on higher demand for restaurant meals. The company reported a consolidated net loss of Rs 67 crore, boosted by a one-time gain of Rs 315.8 crore from the sale of a stake in sports platform Fitso.

The company published excellent figures, reducing losses considerably. Moreover, his income also skyrocketed, almost doubling. The company said it was also close to breaking even on EBITDA.

“We are very bullish on the product-market fit, unit economics, as well as the growth trajectory of the fast-paced commerce category. This reminds us of the food delivery category a few years ago, when many many platforms were competing in a large and growing market, but ultimately only the few that provided an exceptional experience for their customers survived,” said Deepinder Goyal, founder and CEO of Zomato in a statement.

“We are becoming increasingly confident in our decision to invest behind market leadership here with a healthy unit economy. Accordingly, we are updating the upper limit of our potential investments in this category to $400 million in cash. over the next two years,” he said.

Commenting on the third quarter results, Abhay Agarwal, Founder and Fund Manager, Piper Serica, a SEBI-registered portfolio management service provider, said, “Zomato’s results have no big surprises. The company is focused on building a broad presence in out-of-home food consumption. GMV and user count showed strong growth on a year-over-year basis without any decline in AOV. The contribution margin improved to 1% and the business achieved profitability at the EBITDA level when the contribution rate moved to 5%. »

Zomato shares: what should investors do?

Shares of Zomato have been bought over the past two days, albeit in limited quantities, reflecting cautious optimism from investors.

“Zomato takes a very strategic and long-term approach to growing its business. Therefore, short-term investors will feel disappointed with recent operational performance. At the same time, it is an attractive entry opportunity if they believe that all of Zomato’s organic and inorganic growth initiatives are heading in the right direction. We believe that a company like Zomato, playing long-term in the fast-growing out-of-home food market, should be viewed for its long-term value creation by long-term investors. With its clear market leadership, strong balance sheet and focus on profitability, we believe it will reward long-term investors handsomely,” Agarwal said.

Reflecting similar thoughts to Agarwal, Gaurav Garg, CapitalVia, said: “Revenues showed a strong increase which is a good indicator, however, the loss narrowed not because of efficiency operational, but because of a one-time gain of Rs 316. crore from its sale of stake in Fitso. I think that in the short term, the title should remain under pressure. Long-term investors should stay invested as the company has ample cash on the balance sheet.”

As of 10:01 a.m., Zomato was trading at Rs 88.80, down Rs 5.65, or 5.98%, on BSE.

Warning:Disclaimer: The views and investment advice of the experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before making any investment decision.

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