Shares of Zomato tanked as much as six percent in early morning trade before recovering after the company delivered a weak set of operational numbers for the third quarter of the financial year 2023.

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At 11:56 am shares of Zomato were trading at Rs 53, down 1.10 percent from the previous close on the BSE.

Zomato on Thursday reported a net loss of Rs 346.6 crore for the third quarter that ended December 31, 2022. In the corresponding quarter last year, the company posted a net loss of Rs 63.2 crore.

Total income stood at Rs 1,948.2 crore during the period under review, up 75.2 percent against Rs 1,112 crore in the corresponding period of the preceding fiscal.

At the operating level, EBITDA loss declined to Rs 366.2 crore in the third quarter of this fiscal over from Rs 488.8 crore in the corresponding period in the previous fiscal. EBITDA is earnings before interest, tax, depreciation, and amortization.

Also Read: Zomato pilot tests grocery service Blinkit on its main app

The company said there was a slowdown in food delivery post-Diwali, but added that it is seeing green shoots of demand coming back in recent weeks.

"This trend has been seen across the country but more so in the top 8 cities," Akshant Goyal, the chief financial officer of tomato said referring to the slowdown.

What do analysts say?

Brokerage firm CITI has a Buy rating on the shares of Zomato with the target price at Rs 76 cut from Rs 85 earlier.

As per the brokerage firm, the gross order value growth in the food delivery business was less than a percent seeing a decline on a quarterly basis. The gross order value (GOV) growth in food delivery in the third quarter was only 0.7 percent quarter-on-quarter (QoQ) in an otherwise seasonally strong quarter. Orders declined quarter-on-quarter while AOV grew.

The monthly transacting users also declined on a quarterly basis but contributing margins were well ahead of gross order value at 5.1 percent. The brokerage firm had estimated the contribution margin of the business to be at 4.1 percent for the quarter.

Morgan Stanley has an overweight call on Zomato shares with its target price at Rs 82. As per the brokerage firm, the unit economics in core business surprised positively and management is confident about its break-even target. Further, its quick commerce showing good traction which is working in favour of Zomato added Morgan Stanley in a note.

Global Brokerage firm Goldman Sachs has a buy call on Zomato shares with a target price of Rs 100. As per the brokerage firm, the adjusted revenue growth of 7 percent on a quarterly basis was driven by strong growth in Blinkit and Hyperpure segments.

Also Read: Zomato relaunches Gold membership with offers on dining and delivery

A decline in monthly transacting users and order frequency in food delivery with no visibility on demand revival, a decline in food delivery tale rate due to lower delivery fee and near-term potential pressure on profitability from dark store expansion and the launch of Zomato Gold can be key concerns for Zomato, as pointed out by Goldman Sachs in a note.

Nomura has a Reduce rating on the Zomato stock with a target price of Rs 50. on Zomato. As per the brokerage firm high growth with high margins cannot come together.

CLSA has a Buy rating on shares of Zomato with the target price at Rs 70. According to CLSA Zomato’s profitability metrics are on the right track, but growth parameters are still slow.

Management actions and quarterly results clearly indicate profitability is a focus for its core food delivery operations. Management maintained its guidance for adjusted Ebitda breakeven (ex-Blinkit) by 2QFY24, CLSA said in a note.

Also read: Zomato Q3 net loss widens to Rs 346.6 crore but revenue jumps 76%