In a significant shake-up in the food delivery industry, shares of Zomato and Swiggy took a nosedive after facing downgrades from BofA Securities, which also slashed their price targets. Citing growing concerns over their future growth prospects and mounting competitive pressures, the research firm moved Zomato’s rating from “buy” to “neutral” and Swiggy’s from “buy” to a more severe “underperform.” The price target for Zomato was cut from Rs 300 to Rs 250, while Swiggy’s was reduced from Rs 420 to Rs 325, bringing it below its initial public offering (IPO) price of Rs 390.
Both companies have been grappling with rising operational costs and the formidable challenge of sustaining profitability amid fierce competition. These developments have put further pressure on Zomato and Swiggy’s stock prices. In recent trading, Zomato saw its shares decline by 5%, reaching an intraday low of Rs 199.90 on the Bombay Stock Exchange (BSE), whereas Swiggy’s shares fell by 3.4%, trading near the newly adjusted target of Rs 326.2.
BofA Securities pinpointed the anticipated losses in the burgeoning quick commerce segment and a slowdown in food delivery growth as central reasons for the downgrades. The firm forecasts an EBITDA for Zomato and Swiggy in fiscal years 2026 and 2027 that could fall 20% to 50% below consensus estimates. Nonetheless, BofA noted no significant deceleration in the food delivery sector itself, but predicts that ongoing competitive intensity in quick commerce could drive higher losses.
This setback adds another layer of complexity for Zomato and Swiggy, already under pressure from aggressive expansions by competitors into dark stores, which has negatively impacted their financial outcomes in the third quarter of FY25. Moreover, both companies face upcoming competition from BigBasket, which plans an IPO in the next 18 to 24 months, and Zepto, which is reportedly gearing up to raise Rs 250 million through a secondary sale ahead of its stock market debut.
The decline in shares has been part of a broader downward trend for both companies. Since peaking, Zomato’s share price has dropped 32.6% from an all-time high of Rs 304.70, now trading at approximately Rs 205. Meanwhile, Swiggy’s share price has experienced a 46% decrease from its peak to Rs 332 per share and continues to languish below its IPO price. This ongoing decline reflects the sustained market challenges and the drastic impact of competitive dynamics on their valuations.
This downturn not only highlights the volatile nature of the food delivery market but also underscores the growing pains as companies strive to adapt to an ever-evolving landscape marked by rapid expansion and intense competition. Investors and stakeholders in these companies now face a period of uncertainty as they navigate through these pressing challenges. As the market continues to evolve, the road to recovery for Zomato and Swiggy may hinge on strategic pivots and cost management to regain investor confidence and market stability.
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Original Source: https://www.news18.com/business/markets/zomato-swiggy-fall-over-3-as-bofa-securities-downgrades-shares-reduces-price-targets-9275179.html
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Publish Date: 2025-03-26 19:01:00
