Food App Zomato Tastes, Splits Brokers On The Flavours Of Growth

Extreme responses have been sparked by the stock Zomato. Brokerages had made contrarian "buy" calls even as the price was falling, it had sparked memefests, and it had led one brokerage to publicly defend its optimistic view.

Brokerages are now expressing their opinions on the company's future direction, which range greatly. One reputable brokerage predicts an upside of more than 43 percent, while another well-known brokerage predicts an upside of more than 29 percent. While the first contends that high profitability margins are incompatible with the food app's growth goals, the second view the food delivery industry's projected break-even date of September 2023 as a significant positive.

This was also the opinion expressed by the brokerage in its earlier analysis from two months prior. The analysts stated in the study from August 19 that a double-digit CM would need an increase in customer delivery prices as well as restaurant commissions. They predict that the former will increase from 15 percent in FY22 to about 17.5 percent in FY31F, while the latter will remain constant at about 6 percent during that time. With fewer food orders and customers who are unwilling to pay a high price for convenience, delivery fee earnings are expected to remain flat.

As a result, they predicted that CM will peak at 7.5 percent by FY31F, exceeding the long-term aim of 4 to 8 percent set by international food delivery companies in developed nations, “where online FD is more mature and customers’ willingness to pay for convenience is higher”.