Zomato: Jefferies downgrades to Hold on quick commerce competition concerns

Investing.com-- Jefferies downgraded Indian food delivery firm Zomato Ltd (NS:ZOMT) on Monday, stating that the stock was likely to see a year of consolidation after strong gains in 2024 due to heightened competition and slimmer margins.

Jefferies downgraded Zomato to Hold from Buy, while also cutting its price target to INR 275 from INR 335, representing an upside of around 5% from current levels. 

Zomato’s shares slid about 5% on Tuesday following the Jefferies downgrade, still, they were sitting on a 124% rally through 2024, as the food delivery firm rode a sharp increase in profitability. 

Jefferies said that its biggest point of concern was increased competition in the quick commerce sector, slashing its core earnings forecast for Zomato’s Blinkit unit amid rapidly growing competition from other brands in major cities. 

While growth is not expected to be deterred by increased competition, given Blinkit’s dominance, profitability is likely to be impacted, Jefferies said, given that Zomato’s competitors, such as Flipkart, Amazon (NASDAQ:AMZN), and Reliance, are “deep-pocketed and may face compulsion to protect their turf.” 

Jefferies warned that Blinkit may not be able to meet its earnings expectations in the long run, and slashed its 2026 EBITDA estimates for 2026 and 2027.