Swiggy, Zomato shares recover after Q3 woes, gain up to 14% in 4 sessions; here's what brokerages say

The shares of food delivery rivals Swiggy and Zomato saw a strong surge in share prices on February 19. Swiggy shares jumped nearly 7 percent to trade at Rs 372, while those of Zomato surged around 5 percent to trade at Rs 234. The two stocks have so far made strong recovery in the past four sessions after massive losses following their December quarter results.

Swiggy share price

Swiggy shares had hit an all-time low of Rs 325.3 on February 14. It was driven by the falling trend which was fueled by its weak Q3 results, along with the initial selloff following the end of the IPO lock-in period. However, the stock has so far recovered over 14 percent to the current level. Despite the recovery, the stock is still significantly lower by 11 percent from its listing price of Rs 420 apiece.

Zomato

Zomato shares had hit an intraday low of Rs 213.44 on February 14. The stock has so far recovered nearly 9 percent since then to trade at the current level. Despite the recovery, the stock is still down nearly 23 percent from its all-time high level of Rs 305 that the stock had hit in December last year.

The fall in stock price was fueled in January when the food delivery giant reported a 57 percent on-year fall in net profit to Rs 59 crore in the third quarter of the current financial year.

Brokerages view:

Brokerage CLSA on February 19 said Zomato and Swiggy were among its top ideas for the long-term, amid the incremental growth in quick commerce and food delivery gross order values (GOVs), as per CNBC-TV18.

Recently, Citi in its latest report had said that Zomato-owned Blinkit and Zepto have cornered a higher market share in India's quick commerce market, followed by Swiggy Instamart.

"In quick commerce, Swiggy may be in the third spot in terms of market share behind Blinkit and Zepto. We estimate Swiggy’s market share at 23 percent, and Blinkit’s market share at 41 percent," the report said.

"The gap in unit economics and cash burn rate for Swiggy are materially worse relative to Zomato, which means there is a lot of ongoing convergence on customer acquisition pace, AOV (average order value) increase, supply chain cost reductions that Swiggy needs to deliver," the note stated.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.