Morgan Stanley remains positive on Indian internet companies despite a significant re-rating and favors Zomato and PB Fintech above rivals.
Zomato's stock has surged in value by 160 percent in the last year.
Foreign brokerage Morgan Stanley is still positive on internet companies notwithstanding the recent steep re-rating of these firms.
The firm observed that for India's internet equities, all macro and micro elements are now in alignment.
Being stock specific and choosing stocks carefully become more important as the dispersion in stock returns increases. When choosing equities, one should consider the market conditions, performance history, forecast, and value.
Morgan Stanley believes that Zomato and PB Fintech are outperforming other online competitors in the internet domain, which is why they are preferred.
Reiterating its overweight recommendation on Zomato, Morgan Stanley set a target price of Rs 235 per share. This suggests a 21% increase in value over the last closing.
Zepto's most recent fundraising round, according to the brokerage, has increased the rapid commerce channel's importance even more. Zomato has emerged as a significant participant in the rapid commerce market after acquiring BlinkIt in June 2022.
For the foreseeable future, there is a good chance that the level of competition in the industry will increase. Morgan Stanley thinks that BlinkIt may fail to reach existing estimates and be forced out of profitability if competition picks up any more.
The stock may see selling pressure as a result of this. Nonetheless, the brokerage said that long-term investors will benefit from any potential pullback in Zomato.
Zomato's stock has surged 160 percent in value over the last year, while the leading index Nifty 50 has increased by just 25 percent in the same period.
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