Shares of Zomato and Swiggy opened nearly 2-4 per cent lower from previous close after brokerage firm BofA Securities downgraded the shares and slashed target prices amid slow growth in the quick commerce space.
This comes just after Macquarie signalled that it preferred shares of restaurants like Devyani International and Westlife Foodworld over food delivery aggregators.
BofA has downgraded Swiggy to underperform from buy rating at a target price of ₹325 from ₹425 earlier. The stock hit a low of ₹326.50 in today’s trade.
On Zomato, it has assigned neutral rating from the previous buy at a revised target price of ₹250 per share.
The brokerage emphasised that the downgrade is majorly led by expectations of rising losses in quick commerce and slowing of growth. It anticipates prolonged competition in the space and expects cash flows to shrink for these companies.
Recently, reports revealed that rival Zepto is in talks for $250 million secondary sale ahead of IPO.
According to BofA, Zomato and SWiggy’s EBITDA for FY26-27 would be 20-50 per cent below consensus.
Meanwhile, analysts of ICICI Securities have maintained buy ratings on Swiggy and Zomato at target prices of ₹740 and ₹310, respectively.
They said that the companies are now looking at upping value proposition for price conscious consumers, given slowing growth in the overall e-commerce space over FY24 and FY25.
Slowdown in discretionary spending and negative externalities disrupting business operations could pose risks, ICICI Securities added.
JM Financial has maintained positive stance on Swiggy, assigning buy at a target price of ₹500.
Zomato shares traded 2.77 per cent lower on the NSE at ₹204, after hitting an intraday low of ₹119.92.
Swiggy dropped to an intraday low of ₹326.50, before trading at ₹334.15 as at 10.37 am, down by 0.99 per cent.