After a massive selloff in the shares of food delivery giants Zomato and Swiggy, analysts believe the time may be right for investors to start adding these stocks to their portfolio carts.
Their optimism, they say, stems from the sharp correction in stock prices and valuations, which seem to have “over-baked” concerns about the two companies.
While operational challenges may persist for the next one to two quarters, analysts argue that the transitory nature of these concerns makes the stocks a compelling “buy” at current levels from a long-term perspective.
“Investors have dumped Zomato and Swiggy shares amid concerns about cash burn in the quick commerce (qcom) segment.
“However, we believe these concerns have been over-baked into stock prices, as Swiggy (consolidated) is now trading at a 30 per cent discount to the par value of its food delivery business, implying a negative value for qcom.
“Zomato, on the other hand, is trading at a value that ascribes nothing to qcom. We think this anomaly is unlikely to persist,” analysts at ICICI Securities said.
So far in calendar year 2025, Zomato’s share price has dropped 19.62 per cent on the BSE, while Swiggy’s has tumbled 33.29 per cent.
In comparison, the benchmark BSE Sensex has declined 3.44 per cent. From their record highs, Zomato shares have fallen 26.61 per cent, while Swiggy shares have plummeted 41.55 per cent. Meanwhile, the 30-share BSE benchmark is down 12.24 per cent.
“The recent correction in Zomato and Swiggy stock prices, driven by concerns over excessive cash burn in the qcom segment, has meaningfully eased valuations, providing comfort.
“We, therefore, suggest that investors use these sharp corrections to build sizable positions in these stocks,” analysts at JM Financial Institutional Securities said.
Analysts believe investors have “panic dumped” the two listed players, pricing in high cash burn and intense competition in the qcom space, especially as Flipkart Minutes and Amazon Now join incumbents such as Zomato’s Blinkit, Swiggy’s Instamart, and Zepto (unlisted).
JM Financial, however, expects industry-wide cash burn in qcom to peak either in the January-March quarter of the current financial year (2024-25/FY25) or the April-June quarter (Q1) of the next financial year (2025-26/FY26), as investments in dark stores and warehousing begin to moderate.
The brokerage said rising average order values, driven by high-value item categories, stable direct costs per order, and an accelerated shift from mom-and-pop stores to qcom channels, should enable incumbents to generate better commissions and ad revenue from suppliers and brands.
“We also believe some rationality will emerge in product-level discounting, customer rebates, and performance marketing spending.
“If these margin drivers play out in tandem, we expect the operating profitability of most qcom incumbents to improve sharply from the second quarter of FY26,” it said.
Beyond qcom, analysts expect the tax rebates in Budget 2025-26 to boost consumption from the next quarter, which they believe will benefit Zomato and Swiggy’s earnings.
Historically, consumption received a leg up in 2005-06, 2010-11, 2012-13, and 2013-14, following meaningful tax cuts in the Budget.
ICICI Securities believes the discretionary nature of the food delivery sector makes it a key beneficiary as consumers begin to see higher disposable incomes from May 2025.
The brokerage has reiterated its ‘buy’ rating on Zomato and Swiggy, with target prices of Rs 310 and Rs 740, respectively.
JM Financial also has a ‘buy’ rating on the stocks, with target prices of Rs 280 for Zomato and Rs 500 for Swiggy.
“Swiggy enjoys a 45 per cent market share in India’s food delivery market, which should grow in the high teens in the medium term along with margin expansion. We expect negative Ebitda and cash flow over FY25 through 2026-27.
“We initiate coverage on Swiggy with a ‘hold’ rating.”
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