Due to poor results in the October–December quarter of FY25, shares of the massive food delivery and rapid commerce companies Swiggy and Zomato continued to lose money on February 11. Zomato’s stock was down about 5% at ₹216.40 per share as of 11:44 AM, while Swiggy’s stock had fallen more than 6% to ₹340.4 per share.
Credits: MoneyControl
Swiggy’s Stock Plunge: A Downward Spiral Continues
For the past five sessions, Swiggy’s stock has been plunging. In comparison to the ₹574-crore loss in the same period last year, the company’s Q3 FY25 net loss of ₹799 crore was astounding. Swiggy’s stock has plummeted by about 26% since the company’s results were announced on February 5 and is now trading far below its initial public offering (IPO) listing price.
From Promising Debut to Steady Decline
Swiggy’s IPO in November 2024 had an encouraging start, listing at a 7.69% premium on the NSE at ₹420 per share and at ₹412 on the BSE, marking a 5.6% premium over the IPO price of ₹390. However, with the current price at ₹340.4, the stock has now fallen by 19% from its debut.
Instamart Investments Drag Swiggy’s Bottom Line
The aggressive push Swiggy has made into rapid commerce through Instamart is one of the main causes of its growing losses. To gain market share in the rapidly developing market, the corporation has been investing heavily in dark store expansion, higher discounts, and hiring more staff. Investors, however, are worried about profitability because these investments have had a significant impact on earnings.
The approaching end of Swiggy’s anchor lock-in term is another significant aspect that could cause additional selling pressure as early investors want to cash out.
Zomato Faces a Similar Fate
Zomato, too, has been facing a rough patch, with its stock price declining significantly over the past few weeks. After reaching an all-time high of ₹304 in December 2024, the stock has now slumped nearly 29% to ₹216.40. The latest dip on February 11 was exacerbated by large block deals in the market, increasing selling pressure.
Earnings Miss and Investor Sentiment
Zomato reported a sharp 57% year-over-year decline in net profit to ₹59 crore in its Q3 FY25 figures, which were made public on January 20. The stock price fell as a result of this. This bad performance has caused the stock to decline rapidly, and the situation has gotten worse after international brokerage firm Jefferies downgraded the shares. The business downgraded Zomato to a “hold” rating, citing concerns about the company’s 2024 pricing hike and the escalating competition in the rapid commerce industry.
Broader Market Weakness Adds to the Woes
The broader market downturn has only made matters worse for Swiggy and Zomato. As of 1:30 PM on February 11, the Sensex was down 1,102.78 points (1.43%), trading at 76,209.02, while the Nifty had dropped 340.5 points (1.46%) to 23,041.10. The weak market sentiment has intensified the selloff in these stocks, making recovery more challenging.
What Lies Ahead for Swiggy and Zomato?
Analysts’ views on Swiggy and Zomato’s futures are divided despite the present slump. Despite cutting its target price from ₹520 to ₹460, Motilal Oswal has kept its rating on Swiggy at “Neutral,” suggesting a possible 35% increase from present levels. Concerns about profitability and competition from new players in the rapid commerce market, however, continue to be major hazards.
How successfully Zomato handles its fast commerce approach and maintains growth in meal delivery in the face of increased competition will determine its future. Given that Jefferies has retracted its bullish position, investors should exercise caution going forward.
Credits: MSN
Conclusion: A Rough Road Ahead
The precipitous stock drops of Swiggy and Zomato underscore the escalating investor apprehensions regarding profitability, competitiveness, and market sentiment. Even while both businesses are still growing rapidly, how well they can strike a balance between expansion and steady profits will be a key factor in deciding how well their stocks perform over the long run. Investors will probably continue to exercise caution until then, keeping a close eye out for indications of improvement in financial measures and overall market stability.
