Swiggy shares tumble over 8% after Q2 results. Here’s why Jefferies, Nomura, Bernstein cut target price

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ETMarkets.com

Swiggy shares fell despite its Q2 net loss narrowing year-on-year to Rs 922 crore. 

Revenue from operations in the reporting period rose 36% YoY to Rs 7,571 crore. Swiggy's consolidated adjusted EBITDA loss widened to Rs 760 crore from Rs 695 crore a year earlier. Swiggy Instamart, the company's quick commerce business, recorded GOV growth of 31% YoY to Rs 9,230 crore during the September quarter, compared with Rs 7,022 crore a year earlier.

Buy, sell or hold Swiggy shares?

Jefferies cuts Swiggy's target price to Rs 330 and says EBITDA losses widened to a three-quarter high, remaining a key concern for the stock. It noted that the current share price does not fully reflect the value of the food delivery business and existing cash, while the company's performance remains lacklustre compared with market leader Eternal. The brokerage said reducing quick commerce losses is essential for value discovery, as this remains a key investor concern.

Jefferies has raised its adjusted EBITDA loss estimates over the forecast period and lowered the valuation multiple for the food delivery business. It has consequently cut its sum-of-the-parts-based target price to Rs 330, while maintaining that Swiggy remains a high-risk, high-reward stock.

Nomura (Buy) cuts target price to Rs 300 from Rs 435 as expects Swiggy's adjusted EBITDA margin expansion to be constrained over the next 12 months, as Eternal's signal to maintain margins and reinvest in growth could limit the scope for improvement. It has cut its FY28F adjusted EBITDA margin estimate by 40 basis points to 4%, while retaining its year-on-year GOV growth estimates of 18% for FY27F, in line with Swiggy's guidance of 18%-20%, and 17% for FY28F. Nomura continues to view food delivery as a cash-generating business for Swiggy.

Bernstein reiterates Outperform on Swiggy but trimmed target price to Rs 350 from Rs 430 suggesting that Swiggy's core food delivery GOV growth remained subdued at around 18% year-on-year, compared with 21.5% for Zomato. It attributed much of the growth gap to self-cannibalisation from Toing, which it views as a separate loss-making venture funded by cash flows. Bernstein added that the contrast with Blinkit's performance is testing investor patience over Instamart's turnaround and path to profitability.

Motilal Oswal has also cut the target price to Rs 280 as it says Instamart currently carries negative value in its DCF, reflecting weaker-than expected growth, and an extended path to profitability. “We cut our FY26-30 NOV CAGR assumption from 38% to 32%, reflecting a slower growth trajectory than Blinkit as competitive intensity continues to weigh on Instamart’s performance. Lower growth is expected to delay operating leverage and extend the period of losses, resulting in downward revisions to our estimates,” the brokerage said.

It continues to believe Swiggy's food delivery franchise and brand recall provide long-term strategic value. However, a clear path toward QC EBITDA profitability remains critical for a meaningful re-rating.

Elara Capital upgraded Swiggy to Buy from Accumulate but cut its target price to Rs 300 from Rs 350. The upgrade comes on the back of a 22% decline in Swiggy's share price over the past three months. Elara said the value of Swiggy's core food delivery business, combined with net cash, implies that Instamart is currently assigned zero valuation. Food delivery gross order value grew 17.7% year-on-year, at the lower end of the company's guidance.