There are three initiating coverages on Zomato this morning. Starting with Morgan Stanley, the brokerage firm has initiated an equal weight rating and a target price of Rs 140 and the strengths are - their strong business model, they are leaders in a fast-growing underpenetrated market, they have the potential to add new adjacencies. The reason why there is an equal weight is because of the business risks, which include the kind of increase in competitive intensity, slower quarter-on-quarter growth with gross order valuation, and that's primarily as people start to dine out again.
Goldman Sachs has initiated a buy rating and a target price of Rs 180 because they believe that the company's total addressable market will increase once they enter the food services as well as grocery services. In fact, they believe that the company's EBITDA will be profitable by FY24 and that's surprising because that is not something that the management has indicated in its draft red herring prospectus (DRHP). So, whether they become EBITDA positive in FY24 or not, is something to keep an eye on.
Bank of America has initiated coverage with a target price of Rs 158 and a buy rating. So, brokerages are largely positive about the opportunities.
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