Synopsis:
Leading brokerage house Motilal Oswal predicts an additional upside of 28% from its current level, citing a rebound in the food delivery business, more discretionary spending on different segments, mainly because of the GST rate cut and many more.
Motilal Oswal has given Swiggy a boost and kept a positive stance on Zomato, pointing to some favorable trends and potential growth in earnings. In this article, we will discuss more about it in detail.
With a market capitalization of Rs 1,12,089 crore, the shares of Swiggy Ltd are currently trading at Rs 450 per share, representing a decline of 27 percent from its 52-week high of Rs 617.30 per share. In the last six months, the stock has delivered an impressive return of 25 percent.
Analyst Comments
Leading brokerage firm Motilal Oswal has upgraded Swiggy to “Buy” from its earlier rating of “Neutral” and has increased its price target to Rs 560 per share from Rs 450, signaling an upside potential of 28 percent from its previous day closing price of Rs 439.05 per share.
On the other hand, it has also maintained its “Buy” rating on its peer, Eternal, as well, which signals an upside potential of 29 percent from its current level.
The brokerage cited that the food delivery and quick commerce sectors, which have faced their fair share of hurdles lately, are now on the verge of a comeback. They predict that food delivery growth, which had been stuck around 17 to 18 percent, will pick up speed and surpass 20 percent in the next two to four quarters.
The firm also expects a rebound in discretionary spending, thanks to GST reforms, which should encourage more dining out and at-home delivery, ultimately driving up order volumes and frequency on these platforms.
As a result, Motilal Oswal has adjusted its food delivery growth forecasts for Zomato and Swiggy to 21 percent and 23 percent, respectively, for FY26-FY27, up from the previous 19 percent-20 percent range.
On the quick commerce front, Motilal Oswal has moved up its profitability expectations for Blinkit and Instamart, as factors like reduced competition, slower dark store expansion, and lower customer acquisition costs are likely to speed up the timeline to breakeven.
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Financial Highlights
The company’s revenue for Q1 FY26 came in at Rs 4,961 crore, registering a 54 percent growth from Rs 3,222 crore in the same quarter last year. Additionally, on a sequential basis, revenue surged by 12 percent from Rs 4,410 crore in Q4 FY25.
Coming to its profitability, the company reported a net loss of Rs 1,197 crore in Q1 FY26 as compared to a loss of Rs 611 crore in Q1 FY25. Additionally, on a QoQ basis, it reported a loss of Rs 1,081 crore.
While Motilal Oswal’s upgrade and the anticipated 28% upside for Swiggy sound encouraging, it’s wise for investors to tread carefully. Even with impressive revenue growth and favorable industry trends, the company is still facing considerable losses, and reaching profitability might take a while.
Additionally, market fluctuations and stiff competition in the food delivery and quick commerce sectors could affect future performance. Therefore, investors need to weigh the risks thoughtfully before making any decisions.
Written by Satyajeet Mukherjee
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