Will Zomato shares double or fall 50%? Here are two contrasting views

Most brokerages remain constructive on shares of food delivery aggregator Zomato Ltd., post the listing of its competitor Swiggy on the bourses on Wednesday.

Out of the 27 analysts that have coverage on Zomato, 24 of them have a "buy" rating, while the other three have a "sell" rating on the stock.

Two brokerages came out with contrasting views on Zomato, while one is expecting the stock to double, the other expects the stock to halve from current levels.

Morgan Stanley maintained its "overweight" rating on the stock and also increased its price target to ₹355 from ₹278 earlier. This is the second-highest price target on the street for Zomato after CLSA's ₹370.

The brokerage expects Zomato to be a potential doubler in the next three to four years.

Rising share of quick commerce in India's retail market, strong execution in food delivery and quick commerce, deep balance sheet and a large profit pool by 2030 keeps Morgan Stanley "Overweight" on Zomato.

Despite the high competitive intensity, Morgan Stanley expects Zomato to retain market leadership and take a disproportionate share of the industry's profit pool.

Zomato's current price is valuing the Quick Commerce business of Blinkit at ₹120 per share, which, according to Morgan Stanley, is conservative.

On the flip side, Macquarie has an "underperform" rating on Zomato with a price target of ₹130, which implies a potential downside of 50% from Tuesday's closing levels.

Macquarie notes downside risks to Zomato's estimates and as a result has cut its earnings estimates on the food delivery aggregator.

Shares of Zomato are trading 1% lower at ₹258.3. The stock is down 13% from its recent peak of ₹298. Despite the fall, the stock is up 107% so far in 2024.