Zomato is among the new-age startups that have changed the way we order food and dine outdoors in the past decade. With the listing of the company, it has provided a venue for retail investors to hold a piece of the pie that can possibly grow and provide capital gains going ahead.
Now coming to the question in a part wise manner
- Is it good to invest in Zomato
- Why are people crazy behind the stock
Let me answer the second one first, Zomato has disrupted the traditional market of QSR, Dine-In and Dine-Out owing to their platform that optimizes delivery and provides a plethora of options. Other than this, Zomato has entered newer segments like BNPL(Buy-Now Pay Later), Acquired Grofers, and turned it into Hyperdelivery Platform – Blinkit, and using the enormous data generated since inception to create custom offers, cards, etc. to its end users.
The use of data in such a huge way has been limited to Fintech(like Bajaj Finserv, etc.) as compared to the Food or Transportation startups. This provides the venue for Zomato to diversify into newer avenues of growth and revenue generation.
This is one of the prime reasons behind the craze.
Now, about investing in the Zomato Stock
Since its listing, the stock has lost more than 50% of its value. Also, the company despite increasing its revenue has been burning cash with low-profit margins. The path along this direction does not show any path for profitability or the ability to detach from the investor money to stay afloat.
Considering this, it would not be a good proposition for mid-to-long term investors to invest in Zomato.
Some indications like
- Less Cash Burn
- High Margins
- Increased EPS
- Hiving off/closing of loss-making verticals
can be chosen as venues to enter the stock. As of now, staying away would be a better bet.
Hope this helps