Zomato, the popular food delivery platform, surprised investors by reporting a profit in the first quarter of this year. As a result, the company’s stock surged by 14% and reached a new 52-week high. This positive development comes at a time when investors have been cautious about investing in tech companies that have yet to show a positive profit.
Many tech companies have been focused on growth and market share, often at the expense of profitability. However, the tide seems to be changing, and Zomato’s quarterly numbers reflect this shift. The company reported positive adjusted earnings before interest, tax, depreciation, and amortisation (EBIDTA) of ₹120 million, as well as a profit after tax (PAT) of ₹20 million. This marks the first time that Zomato has turned a profit.
The growth in the first quarter can be attributed to rising demand and Zomato’s loyalty program, which has helped generate more revenue. Despite tricky weather conditions and torrential rains that affected both demand and delivery partners, the company managed to achieve an 11% growth in demand. While modest, this number demonstrates the company’s potential for future growth.
Zomato expects the growth momentum to continue and plans to further increase profits in the upcoming quarters. The company also believes that its recent acquisition, Blinkit, will drive more value for shareholders than Zomato itself. Additionally, Hyperpure, Zomato’s one-stop procurement solution, saw a 29% increase in revenue compared to the previous quarter.
While Zomato’s fundamentals continue to improve, there are still challenges ahead. The company faces significant ESOP costs and operates in an increasingly competitive market. This means that the road to profitability remains somewhat uncertain.
With the recent spike in its stock price and positive quarterly results, Zomato’s future looks promising. However, investors should remain cautious and closely monitor the company’s progress in achieving sustained profitability.
In conclusion, Zomato’s surprise profit in the first quarter and subsequent stock surge indicate a positive turning point for the company. Despite challenges and uncertainties, Zomato’s growth potential and commitment to profitability make it an intriguing option for investors. Time will tell if the company can maintain this positive trajectory and deliver long-term value to its shareholders.
