Three reasons why Swiggy shares have a 22% upside, according to Morgan Stanley

Brokerage firm Morgan Stanley has initiated coverage on Swiggy with an "overweight" rating on Tuesday, June 3.

Morgan Stanley has ascribed a price target of ₹405 for Swiggy, which implies a potential upside of 22% from Monday's closing levels and is marginally higher than its IPO price of ₹390 per share.

The brokerage has highlighted that its "overweight" stance on Swiggy is based on three important factors. The first being its improving execution in the food delivery business, expanding quick-commerce TAM and aggressive investment by the company and that the market is pricing in steep investments, but not reflecting the same in its topline growth assumptions.

Morgan Stanley expects food delivery to remain a duopoly market in India and with Swiggy's improved execution, its margin gap with Eternal in this segment may narrow.

Assuming that Swiggy maintains its market share, its quick-commerce Total Addressable Market (TAM) may increase to $57 billion by 2030.

It is valuing Swiggy's food delivery business at 25 times its financial year 2028 adjusted EBITDA basis, which is a 5% discount to Eternal's food delivery business. Swiggy's Quick Commerce vertical, Instamart, is valued at 27 times financial year 2031 adjusted EBITDA basis, which is a 25% discount to Eternal's Blinkit.

Out of the 21 analysts that have coverage on Swiggy, 15 of them have a "buy" rating on the stock, while three each have a "hold" and "sell" recommendation on the food delivery aggregator.

Shares of Swiggy ended little changed on Monday at ₹333, still below their IPO price. The stock has declined 3% in the last one month.