In early morning trade, Zomato shares are down more than 2%, continuing the sell-off that has lasted six sessions. Today’s Zomato share price opened with a downside gap of more than 2% and dropped to an intraday low of 54.05 on the NSE.
The food aggregator’s shares have plummeted after it revealed plans to pay $4,447 crore to purchase Blinkit (formerly known as Grofers). On June 24, 2022, Zomato’s board of directors approved the company’s acquisition of cash-strapped Blinking. Zomato shares have dropped from 70.50 to 55.10 a share since the news of this acquisition, losing more than 20% in six straight sessions.
Stock market experts claim that the stock appears weak on the chart pattern and could decline even further, down to levels between 30 and 25, if it gives a breakdown below levels of 50 on a closing basis. Investors were urged to refrain from opening new positions in the company, and those who already owned it were instructed to rigorously keep their stop loss below $50.
According to Zomato, rapid commerce expands the company’s potential market, profit margin, and commercial viability.
Additionally, the peak times for food delivery demand complement the rapid commerce demand peaks that occur outside of mealtimes. It thinks the acquisition will lower delivery costs and enhance the utilization of Zomato’s hyperlocal delivery fleet.
“People are focusing more on profitability during the current fundraising season, which led to a rise in Zomato’s net losses during the most recent quarter. Investors are unhappy when a loss-making company buys another company since that company might be subject to strict government regulations and hasn’t yet demonstrated a path to profitability “Yashvardhan Singh, the chief associate of Sarvaank Associates, had said.
According to the chart pattern, Zomato shares are fragile and may continue to deteriorate below levels of $50 per share. The price may rise to $30 to $25 a share after providing a breakdown below $50 on a closing basis, so holders of the stock should keep a strict stop loss below that level.
According to Sumeet Bagadia, Executive Director at Choice Broking, new investors are advised to steer clear of taking any positions on the counter and look for better stocks to invest in. Zomato’s market valuation is currently about $41,970 crore, and its share price has dropped more than 60% YTD.