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Shares of Zomato and Swiggy fell following BofA Securities’ downgrades, which also reduced their price targets
Zomato, Swiggy Shares Fall
Shares of Zomato and Swiggy fell following BofA Securities’ downgrades, which also reduced their price targets. BofA Securities downgraded both companies, citing concerns over their future growth prospects and the increasing competitive pressure in the food delivery industry. The research firm lowered its price targets for Zomato and Swiggy, adjusting the valuation to reflect the evolving market conditions.
Zomato shares faced pressure in today’s trade, dropping 5% to an intraday low of Rs 199.90 on the BSE, while Swiggy also experienced a decline. The downgrades come amid ongoing concerns about rising operating costs and the challenge of maintaining profitability in an intensely competitive environment.
Zomato has been downgraded to “neutral” from BofA’s previous “buy” rating, with its price target reduced to Rs 250 from Rs 300. Meanwhile, Swiggy has received a double downgrade from BofA, dropping to “underperform” from the earlier “buy” rating. Its price target has been lowered to Rs 325 from Rs 420. The new target for Swiggy is now below its IPO price of Rs 390, and the stock is trading near this revised target.
BofA Securities cited expectations of increasing losses in the quick commerce segment and slowing food delivery growth as the primary reasons for the downgrades. The brokerage forecasts that Zomato and Swiggy’s Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) for FY26 and FY27 will be 20% to 50% below consensus estimates.
Despite this, BofA notes no significant slowdown in the food delivery segment but predicts prolonged competition in quick commerce, which may lead to higher losses. Zomato shares fell 5% to Rs 199, while Swiggy’s stock dropped 3.4% to Rs 326.2.
Zomato and Swiggy have been under sustained pressure due to the aggressive expansion of dark stores by competitors and concerns over high valuations, leading to a continuous decline since December.
Intensifying competition has compelled both companies to invest heavily in expanding their dark store networks, impacting their financial performance in Q3FY25.
Adding to the challenges, the companies are set to face another rival in the public markets, as BigBasket is reportedly planning an IPO within the next 18 to 24 months. Meanwhile, recent reports suggest Zepto is looking to raise Rs 250 million through a secondary sale ahead of its planned listing.
Zomato and Swiggy have now declined by up to 46% from their recent peaks. Zomato, which saw a strong rally from March 2023 to December 2024, is now trading at Rs 205, down 32.6% from its all-time high of Rs 304.70. Swiggy has suffered even steeper losses, plunging 46% from its peak to Rs 332 per share, now trading below its IPO price of Rs 390.
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