Swiggy Bull Vs Bear Case: One analyst sees a 16% downside, another a 20% gain

Shares of Swiggy Ltd., the food delivery aggregator and Zomato Ltd.'s competitor, made their stock market debut on Wednesday, November 13. The stock listed at a 8% premium, nearly gave up all those gains and is now up over 10% from its issue price of ₹390.

The stock has already received recommendations from analysts even before making its debut on the bourses.

JM Financial features on the bull side, initiating coverage on Swiggy with a price target of ₹470, which implies a potential upside of 20% from its IPO price.

JM Financial wrote in its note that Swiggy continues to be one of the leading hyperlocal delivery platforms in India, bettered only by Zomato.

Despite having ceded some space to competition, JM Financial believes Swiggy is one of the fastest growing consumption plays with multiple levers to move towards sustainable margins.

However, the brokerage choses Zomato over Swiggy as even though Swiggy offers decent upside on an absolute basis, Zomato is preferred only due to its superior execution in the past and market leadership across key segments.

JM Financial though, advises investors to play both, with preferably a higher weightage to Zomato as both continue to remain the fastest growing consumption names and could outperform market returns.

However, JM Financial's bullish view is countered by Macquarie, who initiated coverage on the stock with an "underperform" rating and a price target of ₹325, which implies a potential downside of 16% from the issue price.

The brokerage said that Quick Commerce is a more complex business with not sustainable economic profits.

Even with core revenue anticipated to grow at a Compounded Annual Growth Rate (CAGR) of 23%, Macquarie expects a breakeven at a Group EBIT level only in financial year 2028.

At the same time, the street also remains divided on Swiggy's competitor Zomato. While Morgan Stanley sees the stock to be a potential doubler in the next three to four years, Macquarie expects the stock to halve from current levels over the quick-commerce uncertainty.