New Delhi:
Bank of America (Bofa) has downed food delivery company Jomato and Swigi on 26 March. This is due to slow growth in food delivery and increasing competition in quick commerce. The Global brokerage firm has rated the rating of Zomato to ‘bye’ from ‘by’. Swiggy’s rating has been ‘underpoor’ from ‘by’.
Bofa with downgrade has also reduced the target price for both companies. The target price of Jomato has been reduced from Rs 300 to Rs 250. Swiggy’s target price has been reduced from Rs 420 to Rs 325.
Even after these changes, analysts are positive about both companies in the medium period. According to Bofa, the Quick Commerce Industry, which was earlier considered a high-goth sector and its profits were improving, but now the loss is going on and the competition is also increasing. Bofa believes that Zomato is in a good position between the two companies. The reason for this is to start business in the company’s scale and Quick Commerce first.
The brokerage firm further stated that the financial position of Jomato is strong. Profit margin is high as well as cash position is better than Swigy. Bofa said that new players are entering the market, so competition is expected to remain at a high level for the next 12 to 15 months. Also said that installed platforms are expanding into each other’s areas and can attract customers by giving more discounts to new entry.
The brokerage firm believes that companies will not make any major increase in platform fees. The reason for this is the slow growth. Jomato and Swiggy are investing in the 10 -minute delivery in -house cafe services, which will increase the expenditure of these platforms.
In the last 12 months, Jomato shares have gained 11.66 percent, but so far this year it has fallen by 26.6 percent. So far this year, Swiggi’s stock has also fallen by 38.3 percent.