Zomato’s stock saw a minor dip on September 26, with shares trading at ₹283.6 at 11:19 AM, marking a 0.63% decrease from the previous closing price. The stock opened lower as compared to its recent performance, fluctuating between a day high of ₹286.45 and a low of ₹280.25.
Despite this slight decline, broader market sentiment remained upbeat, as the benchmark Sensex was trading at ₹85,377.52, up by 0.24%, indicating an overall positive market trend for the day.
On the technical front, Zomato’s stock is showcasing mixed signals. The stock is currently trading above several significant Simple Moving Averages (SMA), specifically the 10, 20, 50, 100, and 300-day averages, signaling a generally positive longer-term trend.
It remains below the 5-day SMA, reflecting short-term resistance. The 5-day SMA for Zomato is currently at ₹285.16, while the 10-day, 20-day, and 50-day SMAs are at ₹279.97, ₹266.67, and ₹251.99, respectively. Longer-term averages are also providing key support, with the 100-day SMA at ₹211.37 and the 300-day SMA at ₹200.25.
From a pivot point analysis, the stock is facing immediate resistance at ₹290.22, with further resistance levels at ₹295.43 and ₹299.02. These levels indicate the stock could face challenges in breaking past these points without significant buying momentum or positive news.
On the downside, support is seen at ₹281.42, with additional support levels at ₹277.83 and ₹272.62. This support zone suggests that if the stock continues to slide, it may find a cushion near these levels.
The fundamental outlook for Zomato presents an interesting scenario. The stock’s P/E ratio stands at an extremely high 420.84, reflecting investor expectations for future growth, but also indicating that the stock might be overvalued relative to its earnings.
A P/E of this magnitude often suggests that the market is betting on substantial future revenue and profit expansion, but it also carries risks if the company fails to meet these expectations. In comparison, many mature companies tend to have P/E ratios below 30 or 40.
Zomato’s ROE is relatively modest at 1.76%, signaling that the company is not currently generating substantial returns from its equity base.
This low ROE is typical for a high-growth, early-stage company like Zomato, which is focused on expanding market share rather than delivering immediate profitability. However, investors may be concerned if this figure doesn’t improve over time, as it indicates limited immediate returns for shareholders.
Institutional holdings also paint a mixed picture. Promoters hold 0.00% of the company’s shares, while mutual funds have a 2.18% stake, down slightly from 2.25% in March.
FIIs hold a significant portion of the stock at 46.13%, though this too has declined from 47.00% in the previous quarter. The decrease in both MF and FII holdings may indicate some cautiousness from institutional investors, possibly reflecting concerns over valuation or market conditions. These shifts in institutional interest could impact the stock’s future price trajectory if such trends continue.
Despite the dip in Zomato’s share price, the broader market showed resilience, with the Sensex up by 0.24% and the Nifty gaining 0.25%. In contrast, Zomato’s peers delivered mixed results.
Companies like Info Edge India and Firstsource Solutions saw their stock prices decline, similar to Zomato, while others, such as Wipro and Eclerx Services, posted gains. This mixed performance across the sector suggests that market sentiment is divided, with some stocks benefiting from positive news or sentiment, while others, like Zomato, experience minor setbacks.
Zomato’s stock appears poised between technical resistance and support levels, with institutional investors seemingly adopting a wait-and-see approach. The company’s high P/E ratio and low ROE suggest that while there is strong confidence in its future potential, there are risks if it fails to deliver on growth expectations.
The median one-year forecasted upside for the stock stands at a modest 0.61%, with a target price of ₹281.87, indicating limited near-term upside unless the company can offer stronger-than-expected earnings or growth figures in the coming quarters.
