Swiggy shares have surged 23% in just seven consecutive sessions, climbing from Rs 470.75 on November 29 to a high of Rs 576.95 in Thursday’s trade, marking a significant 11% jump in a single day. Despite this rally, analysts are cautious about the stock’s future, suggesting potential downside as the stock has now reached levels that may not justify further growth.
Analysts Set Target Prices Below Current Levels
HDFC Institutional Equities (HSEI) has maintained a 12-month target price of Rs 470 for Swiggy, a level the stock was trading at just a week ago, signaling a potential decline. Similarly, Motilal Oswal Financial Services (MOFSL) has set a target price of Rs 475. Both brokerages have expressed concerns over the stock’s future performance, with HSEI downgrading the stock to “REDUCE.”
HSEI highlighted that while Swiggy has made strides in customer acquisition and its dark store network, its peer Blinkit has made better progress in terms of unit economics at a similar scale. The brokerage also mentioned that the recent rally in Swiggy’s stock price suggests that the convergence with Blinkit is seen as inevitable, but they remain skeptical about this view.
MOFSL’s View on Swiggy’s Future Growth
MOFSL also emphasized that Swiggy’s stock re-rating will depend on its ability to accelerate Gross Order Value (GOV) growth, increase Average Order Values (AOVs), and improve execution in the quick commerce business. The brokerage expects Swiggy to report a PAT margin of -16.1% in FY25, improving to -3.9% in FY26, and turning positive at 1.8% in FY27. However, the recent increase in ESOP expenses has impacted the company’s PAT, leading MOFSL to maintain its “Neutral” rating on the stock.
JM Financial’s Optimism Amid Caution
Despite the cautious outlook from HSEI and MOFSL, JM Financial remains optimistic about Swiggy’s long-term prospects. Although the brokerage had previously set a target price of Rs 550, which was surpassed after Thursday’s rally, they continue to support the stock with a “Buy” rating. JM Financial praised Swiggy for setting ambitious goals and raising its GOV target multiple for Instamart, following a significant improvement in business growth and profitability.
Conclusion
Swiggy’s stock has enjoyed a strong rally recently, but analysts are divided on its future trajectory. While the company is making progress in customer acquisition and its business model, concerns remain about its ability to maintain this momentum and achieve profitability. Investors should remain cautious as the stock may face headwinds, with target prices from brokerages suggesting potential downside from current levels.
