Is zomato currently a good investment after the fall?

Zomato is a website that lets you search for and order food. Users can also find out the ratings and reviews of restaurants in their area. It’s currently in 12 countries, with most users in India.Zomato shares have reversed their uptrend from the past few days and fallen by over 2% in morning trade. Zomato is a food ordering and discovery app that is present in 23 countries around the world.

If you are a long term shareholder, hold your shares and look for opportunities. Zomato management has a proven track record of delivering good returns to shareholders and this deal is funded by strong cash reserves. In the medium to long term, costs ought to reduce significantly as zomato experiments with machine learning and automation technologies. Also, revenue from the US, Singapore and other emerging markets should improve as they take off

Current Share price of Zomato

-Zomato’s premium is still high according to analysts despite the recent decline because of difficulties satisfying investors’ high expectations for growth. They also plan on taking advantage of a slow period in their industry to focus on improving their current service quality and content offerings. They have chosen to remain focused on the online food ordering business. They are not interested in expanding into the restaurant search space and they will continue to outsource their delivery services to third party providers. Zomato is looking at ways to drive more users and increase average spending per customer. Another way that Zomato could expand is by acquiring more delivery companies, like its competitor Swiggy. 

-Investors voiced concerns that Zomato needs to be careful about overspending on acquisitions and new initiatives, which currently represent two-thirds of its net sales, mostly generated from advertising and platform fees. 

-Zomato is looking at ways to drive more users and increase average spending per customer. Another way that Zomato could expand is by acquiring more delivery companies, like its competitor Swiggy. 

-Zomato will be launching new features including ‘make a list’ and ‘share my list’ to encourage people to create lists and share them with their friends. Zomato will also launch a feature called ‘inbox’, which will enable users to get rewards when they open the app.

-Zomato is looking at ways to drive more users and increase average spending per customer. Another way that Zomato could expand is by acquiring more delivery companies, like its competitor Swiggy. 

-Zomato currently allows restaurant owners to define their own delivery rates, which has led to wide variation in delivery costs.

-position to compete head on with the market leader Swiggy in the space of food delivery

Conclusion

As of now, Zomato share price is a bad buy. Wall Street clearly dislikes the acquisition as they have sold off zomato shares and pushed prices down. This makes the current valuation extremely high at around 100 times trailing earnings (The Wall Street currently trades at around 17 times trailing earnings) . Moreover, the acquisition in itself looks like a desperate attempt to douse fears about competition from Yelp and Foursquare. Currently Adani share price is increasing , so you can focus here.