The stock market took a nosedive on Tuesday after starting the day on a strong note. The Bombay Stock Exchange (BSE) Sensex, which tracks 30 major companies, dropped by over 830 points, while the Nifty also slid more than 200 points. Amid this market turbulence, online food delivery giant Zomato saw its shares plunge by over 12%. Notably, after being included in the BSE Sensex index, Zomato’s stock initially struggled but recently showed signs of recovery—until now.
Zomato’s Freefall: What Went Wrong?
Zomato’s stock suffered a major blow as trading began on Tuesday. After opening at ₹223, it tumbled by over 12% within the first hour, hitting ₹207. Just a day earlier, on Monday, the stock had opened at ₹247. This two-day decline has wiped out ₹40 per share from Zomato’s value.
The downward spiral began when the company released its quarterly earnings on Monday. Investors were clearly unimpressed by the results, which triggered the continued sell-off.
What the Quarterly Results Reveal
In its October-December 2024 earnings report, Zomato announced a 57% drop in profit, compared to the previous quarter. The company’s net profit stood at ₹59 crore, significantly lower than ₹138 crore during the same quarter last year.
The primary reason for this sharp decline? Rising expenses. While the company’s revenue surged by 64% in the third quarter, its expenses grew at a much faster pace.
Adding to the pressure was a massive ₹103 crore loss incurred by Zomato’s quick-commerce business, Blinkit, during this period. These financial results directly impacted investor sentiment, leading to the dramatic fall in Zomato’s share price.
Market Cap Takes a Hit
Zomato’s troubles have had a noticeable impact on its market valuation. After being added to the BSE Sensex Index on December 23, 2024, the stock has mostly been in a downward trajectory. By Tuesday, Zomato’s market capitalization had fallen to ₹1.88 lakh crore.
To put things in perspective, Zomato’s 52-week high was ₹304.70, while its 52-week low was ₹127. In just the past month, the stock has lost 21% of its value. However, over the past year, Zomato has still managed to deliver a 68.52% return to its investors, underscoring its volatile yet rewarding nature.
Key Takeaways for Investors
- High Volatility: Zomato shares have been highly volatile, with significant highs and lows over the past year.
- Rising Expenses: The sharp drop in quarterly profit is a red flag, signaling that the company needs to manage its growing expenses better.
- Sector Challenges: The food delivery and quick-commerce industries remain competitive and capital-intensive, impacting profit margins.
- Long-Term Potential: Despite the recent setback, Zomato’s revenue growth indicates strong underlying demand for its services.
Advice for Investors
If you’re considering investing in Zomato or any other stock, it’s essential to consult with financial experts and carefully evaluate the company’s performance and long-term growth prospects. The stock market is inherently risky, and well-informed decisions can help mitigate losses.
(Disclaimer: This content is for informational purposes only. Always consult with a professional financial advisor before making investment decisions.)
