Zomato, Swiggy Shares Drop Up to 5% as BofA Securities Downgrades Ratings and Cuts Price Targets

Zomato, Swiggy Shares Fall 5% as BofA Securities Downgrades and Slashes Price Targets

Zomato, Swiggy Shares Fall After BofA Securities Downgrades and Slashes Price Targets

Zomato and Swiggy shares declined after BofA Securities downgraded them, lowering their price targets as well. Both companies were downgraded by BofA Securities, based on expectations of the companies’ future prospects and the mounting competitive pressure in the food delivery market. Zomato and Swiggy were downgraded by the research company, reducing their price targets by revising the valuation with the changing market conditions in mind.

Zomato stocks were under pressure in today’s trading, falling 5% to an intraday low of Rs 199.90 on the BSE, with Swiggy also seeing a fall. The downgrades are against the backdrop of concerns about increasing operating expenses and the struggle of keeping profitability alive in a highly competitive setting.

Zomato has been downgraded to “neutral” from BofA’s earlier “buy” rating, with the price target slashed to Rs 250 from Rs 300. On the other hand, Swiggy has been double-downgraded by BofA, to “underperform” from the earlier “buy” rating. Its price target has also been cut to Rs 325 from Rs 420. Swiggy’s new target is now below its IPO price of Rs 390, and the stock is at its new lower target.

BofA Securities attributed the downgrades to the expectations of rising losses in the quick commerce business and decelerating food delivery expansion. The brokerage estimates Zomato and Swiggy’s Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) for FY26 and FY27 to be 20% to 50% lower than consensus estimates.

This notwithstanding, BofA reports no major deceleration in the food delivery business but foresees extended competition in quick commerce that could result in increased losses. Zomato shares went down 5% to Rs 199, whereas Swiggy’s stock dropped 3.4% to Rs 326.2.

Zomato and Swiggy have been constantly battered due to the sharp growth of dark stores by competitors and overvaluation concerns, leading to a steady downtrend ever since December.

Stepping up competition has forced the two companies to go all out to increase their dark store chains, affecting their bottom line in Q3FY25.

Adding to the woes, the firms are also going to have one more competitor in the public markets as BigBasket is planning an IPO in the next 18 to 24 months, according to reports. In the meantime, recent news has indicated that Zepto is seeking to raise Rs 250 million via a secondary sale prior to its scheduled listing.