Swiggy Share Target: The shares of Swiggy, a company operating in the online food delivery and quick commerce sector, are undergoing a lot of upheaval in the stock market these days. In the last trading session, the company’s share fell by a whopping 16.75 percent to Rs. closed at 175. Investors have sold heavily in this stock due to quarterly results not coming in as expected. But even after this big fall leading brokerage firm ICICI Securities still has faith in the stock. The brokerage maintains a ‘BUY’ rating on Swiggy’s shares. The company believes that the current price of Rs. Compared to 176, this stock can see a spectacular increase of around 127 percent.
How did the company perform in the second quarter?
If we look at the company’s quarterly results, there has been good progress on the earnings front, but losses are still a concern. Swiggy’s revenue rose 11.1 percent quarter-on-quarter to Rs 7,571 crore in the second quarter. If seen on a year-on-year basis, the company’s earnings have seen a massive jump of 36.1 percent. However, Swiggy suffered a net loss of Rs 922 crore in the second quarter. However, one good thing is that the margins of the company’s food delivery business have seen an improvement. Its adjusted EBITDA margin rose to 3.4 percent from 3.1 percent last quarter. The brokerage firm fully expects this figure to improve in the coming quarters.
The company got stuck in the expansion of Instamart
Swiggy is rapidly expanding its fast-commerce business Instamart. During the second quarter, Instamart’s gross order value (GOV) increased by 16.7 percent to Rs. 9,230 crores. A year-on-year increase of 31.4 percent has been recorded. The company has also opened 69 new stores in this quarter to boost business. By the end of September, the total number of Instamart stores in 133 cities in the country had reached 1,240. However, despite the store expansion, the business is running at a loss. ICICI Securities believes that Instamart’s margins could improve in the second half of the year if the company reduces the discounts offered to customers a bit and also controls its costs.
Why did the brokerage lower its target price?
ICICI Securities has given Swiggy a buy rating, but has also cut the target price. The brokerage had previously paid Rs. 520 was given a target, which has now been reduced to Rs. 400 has been done. Apart from the increase in cost of capital estimates, the brokerage cited the number of potential shares as the main reason behind the target reduction. Going forward, Swiggy will need to maintain growth in its food delivery business, according to the brokerage. Apart from this, reducing the losses from Instamart will also be very important for the company.
Investors’ money has halved in the last one year
The past few times have been very difficult for investors investing in Swiggy shares. The stock has lost 38.50 percent in the last 6 months due to continued selling. If we look at the record of the last 1 year, this stock has broken by 58.65 percent. This means that more than half of the investors lost their money within a year. This massive fall in share prices has also directly affected the valuation of the company. Swiggy’s market cap has now come down to 40.42 thousand crore rupees. In such a scenario, this new report from the brokerage comes as a relief to investors who are stuck in the stock at higher levels.
