Zomato vs Swiggy: Which stock offers better value after the recent correction?

Indian stock market: Shares of India’s two leading food delivery aggregators—Zomato and Swiggy—have witnessed a sharp decline from their recent peaks, slipping to multi-month lows. The downturn comes amid a broader correction in domestic equity markets, with investors growing increasingly cautious about risky assets, and new-age tech stocks being no exception.

Valuation concerns have also weighed on sentiment, and intensifying competition in the quick commerce (QC) space has added to the pressure, with new entrants like Flipkart and Amazon expanding their footprint. This has forced both companies to invest aggressively in expanding their dark store network, impacting their financial performance in Q3FY25. 

The once high-flying Zomato stock, which maintained a one-way rally between March 2023 and December 2024, is now trading at ₹205, 32.6% below its all-time high of ₹304.70 apiece. On March 11, the stock slipped below the ₹200 mark for the first time in eight months.

Its peer, Swiggy, has faced even steeper losses, correcting 43% from its recent high and currently trading at ₹356 per share. The crash has also pushed the stock to trade below its IPO price of ₹390 apiece.

Both Zomato and Swiggy are now facing intensifying competition in quick commerce with the launch of Flipkart Minutes and Amazon Now. These new entrants are rapidly expanding their footprint in major cities, challenging the dominance of existing players. 

However, analysts believe that emerging competition in quick commerce is unlikely to significantly impact incumbents. They also view the recent correction as an opportunity, suggesting that the current valuations of both stocks have reached a more comfortable level. As a result, they recommend that investors use the sharp decline to build sizeable positions in these names.

JM Financial favors Zomato over Swiggy

According to the domestic brokerage firm JM Financial, Zomato is a clear market leader (in GOV/revenue terms) across all its operating business segments. It is also well ahead of the competition on the profitability front across business segments.

Moreover, the brokerage underscores that it is the only major hyperlocal delivery company in the country that, at a consolidated level, is currently generating free cash flows without compromising on top-line growth.

“This indicates the strong execution capabilities of the management, giving us the confidence that Zomato is the best-placed company to fend off emerging competitive threats in QC,” it said. The brokerage, therefore, continues to prefer Zomato over Swiggy among the two listed hyperlocal delivery players, following the recent correction in both stocks.

It has a target price of ₹280 apiece for Zomato, indicating an upside potential of 34.6% from its latest closing price. Meanwhile, for Swiggy, it has a price target of ₹500, signaling a potential return of 41.7%. The brokerage has a ‘buy’ rating on both stocks.

Incumbents hold the edge in Quick Commerce

JM Financial reiterates that there is a conspicuous shift in consumer spending from traditional e-commerce and unorganized channels to quick commerce (QC). Recent forays by Flipkart and Amazon validate these trends to a certain extent.

In fact, QC platforms have, of late, started seeing demand for high-involvement, high-value products in tier-1 cities. This indicates that the line between traditional e-commerce and QC is rapidly blurring, potentially expanding the serviceable total addressable market (TAM) for the segment, it stated. 

The brokerage believes that incumbent players are better positioned to capitalize on this opportunity due to high customer recall for their fast deliveries, a better understanding of micro-market demand patterns, and multi-year experience in hyperlocal deliveries. 

JM Financial further stated that the recent entrants will have to grapple with the challenges of having lost the first-mover advantage. Since QC is a retail business, eventual winners will be determined by strong execution from management rather than balance sheet strength alone. The brokerage, therefore, strongly believes that emerging competition is unlikely to affect the incumbents’ long-term potential.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.