Swiggy or Zomato: Which is Better for Long Term Investment?: Investing in India’s burgeoning food delivery sector presents a compelling opportunity, with Swiggy and Zomato standing as the primary contenders. Both companies have recently gone public, attracting significant investor interest. A thorough analysis of their market positions, financial performance, growth strategies, and industry dynamics is essential to determine their suitability for long-term investment.
Investors are asking this question from the stock market experts and other financial experts-Swiggy or Zomato: Which is Better for Long Term Investment? In this article, we will attempt to provide an honest answer to the questions asked by the investors.
Market Position and Growth Trajectory
Zomato has established itself as the leader in India’s food delivery market, commanding approximately 56-57% of online food orders in FY24, while Swiggy holds around 40%
Zomato’s dominance is attributed to its superior execution and strategic acquisitions, such as the purchase of Uber Eats’ India operations, which have expanded its market share. In contrast, Swiggy has diversified its services beyond food delivery, notably through its quick commerce platform, Instamart, catering to the growing demand for rapid grocery deliveries.
Financial Performance
In terms of revenue growth, Zomato has outpaced Swiggy, achieving a 28% annual increase between FY22 and FY24, compared to Swiggy’s 17%
Zomato has also made significant strides toward profitability, with its food delivery segment reaching EBITDA breakeven in Q1FY25. Swiggy, while still operating at a loss, has narrowed its deficit and reported positive earnings in its food delivery segment on an adjusted EBITDA basis
Both companies are investing heavily in expanding their quick commerce services, which, while promising, require substantial capital and may impact short-term profitability.
Growth Strategies and Future Outlook
Zomato projects a 30% annual growth in its food delivery business over the next five years, driven by increased competition and innovation in the sector
The company is introducing new features such as scheduled deliveries and catering services to enhance user experience and expand its customer base. Swiggy, on the other hand, is focusing on scaling its quick commerce platform, Instamart, and has shown substantial growth in this segment
Analysts suggest that Swiggy’s diversified service offerings could provide a competitive edge in the long term, though it currently trails Zomato in market share and revenue growth.
Analyst Recommendations
Analysts are divided on which company presents a better long-term investment. Some prefer Swiggy due to its potential in quick commerce and diversified services, setting a long-term price target of Rs 700
Others favor Zomato for its market leadership and superior execution, recommending a ‘buy’ rating with a target price of Rs 280 per share.
Investors are advised to consider both companies, with a higher weighting for Zomato in the short to medium term, given its current market position and financial performance.
Conclusion
Both Swiggy and Zomato offer unique value propositions in India’s dynamic food delivery market. Zomato’s market leadership, robust revenue growth, and path to profitability make it an attractive option for long-term investors seeking stability and consistent returns. Swiggy’s diversified services and focus on quick commerce present potential for significant growth, albeit with higher associated risks due to its current financial standing and the capital-intensive nature of its expansion strategies. Investors should carefully assess their risk tolerance, investment horizon, and the evolving dynamics of the food delivery and quick commerce sectors when making investment decisions.
Disclaimer: Investment in Capital Market/Share Prices are subject to market fluctuations and are dependent on several factors. These predictions are based on the current market conditions and the future market expectations. Investors are advised to take into consideration all these factors before making any investment in Capital Market. This article should not be treated as Investment advisory and is for general Guidance & Educational purpose only. We keep revising our share price targets based on the latest information available with us. Please keep visiting our website regularly to keep yourself updated. MoneyInsight does not offer investment advice and does not encourage any action based on its content.
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