Swiggy Shares Surge, Buck Weak Q4: Here's What Analyst Say

Swiggy shares experienced a surge of over 2.5% on the National Stock Exchange, despite widening losses. The Zomato rival's loss figure nearly doubled to Rs 1,081 crore compared to Rs 554 crore reported in the corresponding quarter of the previous year. The revenue figure saw a double-digit surge of 45% YoY (year-on-year) to Rs 4,410 crore in Q4.

At 11:20 am, Swiggy shares were trading at Rs 320 price level, up by 2.49% on the National Stock Exchange.

For Swiggy, heightened competition in the quick commerce business sphere had already made things tough. However, that didn't stop Swiggy from spending heavily on advertising. As for the current rise in share price, D-street was already counting in a weak Q4.

"While the food delivery business remains stable, we believe that the execution gap is widening between the two quick commerce platforms. Instamart continues to lag Blinkit in both growth and incremental unit economics," as per Anand Rathi brokerage firm.

"Blinkit reported -1.9% adj. EBITDAM in Q4 vs. -18% for Instamart; hence, we raise our estimate for quick commerce losses for Swiggy and expect it to now turn profitable by FY28 vs. FY27 earlier," the report further added.

Analysts Weigh in

While the overall outlook looks quite blurry for Swiggy as the quick commerce space gets more crowded and competitive, analysts are bullish on Swiggy's megapod strategy.

"While Swiggy is admittedly behind competitors when it comes to the 20k+ SKU game, its megapod strategy has the potential to breach the e-commerce territory and could provide a meaningful push to AOV (average order value)," Motilal Oswal said in a report.

The brokerage firm has reiterated its 'Neutral' rating on the stock. "DCF-based valuation of Rs 340 suggests a 9% potential upside from CMP," the report read.

"Overall, consolidated operating losses should contract henceforth as food delivery margin gains are also likely to continue. The stock is likely to remain under pressure in the near term due to weak 4Q results as well as the upcoming expiry of pre-IPO shareholder lock-in on 12th May. Long-term investors can use these pressures to build a sizeable position in Swiggy as, at CMP (current market price)," as per JM Financials.

Currently, Swiggy appears to be valued primarily for its core food delivery business, with little to no value being assigned to its other growing segments like Instamart and other business segments, according to analysts. For long-term investors, this might present an opportunity. The brokerage firm has maintained a 'Buy' rating on the stock with the target price set at Rs 450.