Zomato rebounds after brutal selloff! Should you buy or steer clear?

After facing a sharp drawdown in the initial part of the week, shares of Zomato bounced back sharply on Wednesday and were up in Thursday's early trade as well. Where is the stock headed in the near term and what should investors do?

Take a look at what experts suggest:

Divam Sharma, Founder at Green Portfolio
The current valuation of $4.5 billion is still above the initial investment price of many pre-IPO investors, triggering a selloff. New investors should let the price settle in, there will still be lots of opportunities to invest in Zomato. Also, one should look for signs of profitability, consistent organic growth and acquisitions showing signs of synergy to enter the stock as an investment.

Prashanth Tapse, VP - Research, Mehta Equities
Zomato needs more money to run the show and burn more money to sustain the market competition. The near-term outlook remains muted as some regulatory hurdles like Blinkit acquisitions risk and corporate governance would disturb investors' sentiments. At this moment on a consolidated level, we believe Blinkit's losses will hurt Zomato’s path to profitability which is the cause of concern for investors. If the deal goes well, this will raise the losses for FY23-FY24 for Zomato. A risk-taking investor can consider buying it for the long term but if you are a conservative investor, you should clearly avoid buying Zomato.

Credit Suisse
The brokerage house has maintained its 'outperform' rating on the stock, with a target of Rs 90. It said Zomato is on a clear road to profitability growth and the existing core customers would drive the food business. CS said in a duopolistic industry, the core user base will drive margins. "Quick commerce is an adjacency, but industry winners are still not clear," it added.

Jefferies
Jefferies remains bullish on the counter as it believes that management has accelerated its journey towards better unit economics. "The company is eyeing a break even in the food delivery business in the near future." It has a buy tag on the counter target price of Rs 100 on the stock.

With the worst of the competition behind, the industry profit pool should rise as the sector is already consolidated unlike some of the other spaces in India where there is still this scope, which would result in interim pain, it said.

Rajnath Yadav, Research Analyst, Choice Broking
Investors with high risk-taking capacities can consider this stock for investment, but not suitable for retail investors.

Mohit Nigam, Head - PMS, Hem Securities
Investors who are still holding or have freshly entered into these fintech stocks should wait for the market to stabilize to average down the price or make a fresh entry. "We do not recommend any fresh entries before any new positive trigger."

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)