Competitors Swiggy and Zomato: Which One is Wiser at Present? Four Vital Elements to Consider
Rewritten Article:
Titan's Clash: Swiggy and Zomato's Dark Store Expansion Challenges Leave Profitability in the Shadows; Here's Which Stock Holds the Key to Success!
No sugarcoating here: Swiggy's collapse in Q4 earnings is a ghastly sight on the profit and loss front. Their expansion into dark stores has been a significant contributing factor to this misery, mirroring the same issues faced by Zomato in their Q4 financials. With both companies' financial reports out in the open, it's high time to dissect them, compare, and determine which stock presents a better investment opportunity now.
Swiggy vs Zomato: Answering the Unasked
Swiggy's Q4 report card
Boasting a market cap of over Rs 77,000 crore, the company reported a net loss of Rs 1,081.18 crore in Q4 FY25, almost doubling from a net loss of Rs 553.70 crore in the same quarter last year. However, their revenue soared by 45% year-on-year, reaching Rs 4,410.02 crore. One key metric, gross order value (GOV), increased by 17.6% year-on-year (YoY).
Zomato's Q4 results
Formerly known as Eternal, the company suffered a significant drop in net profit, falling by 77.71% YoY to Rs 39 crore, compared to Rs 175 crore in Q4FY24. Despite this, they reported revenue from operations at Rs 5,833 crore, up by 63.76% compared to Rs 3,562 crore reported in the fourth quarter of the previous financial year. Zomato's food delivery GOV grew by 16% YoY, a decrease of 1% quarter-over-quarter (Q-o-Q), while its net order value (NOV) increased by 14% YoY, with a 3% decrease Q-o-Q.
Zomato Q4: Profit Plummets 77.71%; Revenue Surging 63.76%; Blinkit Sets New Store Record
Swiggy vs Zomato: CEOs' Take
Swiggy CEO envisions a path to profitability beyond Q4
Sriharsha Majety, the company's founder and group CEO, stated, "We believe dark store expansion has peaked losses in late Q4. From hereon, we expect to gradually unwind these losses, with the pace determined by increasing average order value (AOV) and take-rates, and the level of competitive intensity."
Zomato CEO maintains hopes for a market share surge
Deepinder Goyal, Zomato's Founder and CEO, commented, "Food delivery competition remains fierce, and it hasn't softened in the last quarter. Our market share has remained stable for several months, and we anticipate gaining some share going forward."
Swiggy vs Zomato: Wall Street's Verdict
JM Financial's take on Swiggy
In terms of brokerage opinions, JM Financial claims Swiggy's earnings were an intricate blend of contrasting performances in food delivery versus quick commerce (Instamart) businesses. While they reported market-leading GOV growth and profit margin improvements in food delivery, their GOV expanded by 101% YoY in Instamart, notably slower than the market, with worsening profitability. This, accompanied by an increase in ESOP costs, led to a wider consolidated EBITDA loss. JM Financial maintains a 'Buy' call on the stock with a target price of Rs 450, implying a potential upside of 44% from the current market price of Rs 313.
Nuvama's perspective on Zomato post-Q4 results
In the wake of the Q4FY25 earnings, international brokerage firm Nuvama Institutional Equities adjusted their target price slightly from Rs 290 to Rs 280 to factor in a shorter-term profit dip in the quick commerce business of Zomato. Despite this, the company boasts a cash balance of Rs 18,800 crore at the end of the fourth quarter of FY25. Nuvama considers this a positive note, signifying that Zomato is not burning cash at the EBITDA level. However, if this lower profitability persists longer, it might pose a risk.
Swiggy vs Zomato: Shares in Motion
Swiggy
Swiggy's share price has endured a 6% drop over the past five trading days, erasing over 5% in the last month and 31% in the last six months. The stock price of Swiggy has corrected 26.5% since its initial public offering (IPO) in November 2024.
Zomato
Zomato's share price has seen a 2% gain in the last five trading days, providing a 6% return in the last thirty days. However, the stock has slipped by 8% in the past six months. It has climbed by more than 16% in the year prior.
Equity Markets, Business, and Swiggy-Zomato
Closing Thoughts
To decide which stock is worth your hard-earned cash, let's weigh Swiggy and Zomato against one another, delving into their earnings, management outlook, and recent analyst recommendations.
As of now, Zomato emerges as the stronger choice for investors, thanks to superior financial performance (profitability, growth rate, and quick commerce scale), a clearer path to sustained profits, and positive brokerage sentiments. While Swiggy continues to grow swiftly, it remains loss-making, grappling with rising operating costs, and with profitability projected to be delayed, it currently appears to be a riskier bet compared to Zomato.
Keep an eye on these stocks, and remember: hasty decisions can be costly. Happy investing!
- The defi market requires careful consideration for portfolio management, as investing in stocks such as Swiggy and Zomato, whose financial reports have shown varying levels of profitability, presents an opportunity for trading and potentially high returns.
- The finance industry is closely watching the competition between Swiggy and Zomato, two major players in the food delivery business, as their recent Q4 earnings reports reveal different paths towards profitability.
- Business analysts are now comparing Swiggy's and Zomato's performance in the stock-market, with Zomato currently showing stronger financial results, making it a more attractive investment opportunity, given its better profitability, growth rate, and quick commerce scale.
- For those interested in the finance sector, monitoring the trading activities of stocks like Swiggy and Zomato can provide insights into the overall health of the business and the investment landscape in the online food delivery market.
