Zomato: After over 160% gains in last one year, Macquarie expects sharp downside of 47% for the stock – here's why

livemint.com:

Zomato, the food delivery platform, faces a pessimistic outlook from global brokerage Macquarie. Contrary to the bullish sentiment of other brokerages, Macquarie predicts a substantial 47 percent downside for the company in the next 12 months.

This bearish projection is attributed to heightened competition within the quick commerce sector, posing challenges for the food delivery platform.The brokerage reiterated its "underperform" call on the stock, with a target price of ₹96, implying a potential downside of 47 percent from Thursday's close of ₹180.60.The escalating competitive landscape primarily influences the bearish target set by the global brokerage, as numerous e-commerce platforms venture into the quick commerce sector. The brokerage notes that several e-retailers are displaying renewed ambitions in quick commerce, although it acknowledges Blinkit as an efficient operator in this space.

Despite the substantial potential Total Addressable Market (TAM) of India's retail sector, the brokerage maintains a pessimistic view on consensus estimates due to the increasing competitive pressure.Macquarie had maintained its 'underperform' rating on Zomato since May of the previous year when it downgraded the stock from its earlier 'neutral' recommendation.As per the brokerage, the primary driver of their caution is the impending launch of JioMart's 30-minute grocery delivery service in multiple cities, commencing next month, and further expansion plans. Reliance Industries' JioMart aims to roll out its 30-minute grocery delivery service initially in eight cities, with subsequent expansion into the top 20-30 cities across the nation in the first phase.Additionally, Macquarie anticipates a downside to both consensus forecasts