Axis Capital’s optimistic assessment of the massive food delivery and quick-commerce company propelled Swiggy’s share price to a new all-time high during the December 16 trading session. The brokerage firm’s analysts set a target price of ₹640 per share and suggested a ‘BUY’ rating, pointing to a 20% upside potential.
Let’s examine the causes of this increase, the brokerage’s research, and the prospects for investors going forward.
Record-Breaking Performance on the NSE
Swiggy’s shares touched an intraday high of ₹612.40, marking a 15.03% jump from its previous close. While the stock cooled slightly by market close, it still ended the day up 11.58% at ₹594, boasting a market capitalization of ₹1,32,963.77 crore.
Trading activity was intense, with 4.81 crore shares exchanging hands, resulting in a total turnover of ₹2,757.07 crore on the NSE.
This marks the second consecutive day of gains for Swiggy, further solidifying its position as a rising star in the Indian stock market.
What’s Driving the Rally?
Axis Capital’s Optimism
The brokerage’s glowing recommendation comes as Swiggy emerges as India’s second-largest player in both food delivery and quick commerce (q-com). According to Axis Capital’s report, Swiggy presents a compelling growth story driven by:
Ambitious expansion in quick commerce: Swiggy’s plans to scale up its q-com operations could lead to significant growth in Gross Order Value (GOV) and topline revenue.
Cost management: Improved cost control measures have put the company on a path toward healthier margins.
Duopoly advantage: As part of India’s food delivery duopoly alongside Zomato, Swiggy benefits from robust growth in a maturing market with room for further margin improvement.
Restructured Leadership and Innovation
Swiggy has transformed over the years from a founder-led company to one with a professional management team, enhancing its operational efficiency. Axis Capital noted that Swiggy’s culture of innovation and a strengthened leadership team position it well to sustain its market leadership.
IPO Journey: From Listing to Record Highs
Swiggy’s stock made its public debut on November 13, 2024, with an IPO price of ₹390 per share. The stock was listed at a 7.69% premium at ₹420 and has consistently performed well since.
The IPO, which raised ₹11,327 crore, saw significant demand, with a 3.59x subscription on the final day of the offer. Investors have continued to show faith in Swiggy’s long-term prospects, as evidenced by the latest surge in share prices.
Challenges and Risks on the Horizon
While the outlook is bright, Axis Capital’s report cautioned investors about several risks that could affect Swiggy’s growth trajectory:
Consumption Slowdown: Economic factors or a dip in discretionary spending could impact food delivery demand.
Disruptive Competition: Increased competition in quick commerce, especially from players like Zepto and Blinkit, could pose a challenge.
Profitability Concerns: Slower-than-expected ramp-up in GOV for quick commerce and profitability improvements could weigh on investor sentiment.
Despite these risks, Swiggy’s ability to navigate a dynamic market and adapt to consumer needs makes it a formidable player in the industry.
Investor Outlook: Is Swiggy a Buy?
Axis Capital’s price target of ₹640 suggests a 20% upside from the current levels, making Swiggy a promising investment opportunity. The company’s dual focus on food delivery and quick commerce, combined with cost management and market leadership, makes it an attractive choice for growth-focused investors.
The rally also reflects growing confidence in Swiggy’s business model, leadership, and innovation capabilities. For those considering entry, the stock still has room to grow, according to analysts.
Conclusion: Riding the Growth Wave
Swiggy’s potential as a long-term investment opportunity is highlighted by its outstanding performance on December 16. The company has shown tenacity, flexibility, and ambition from its outstanding initial public offering (IPO) start to its current record highs.
Swiggy is still in a strong position to provide value to shareholders as it grows its presence in fast commerce and fortifies its position in food delivery. To make wise choices, investors should, nevertheless, monitor market conditions and any hazards.
