Despite ongoing controversy surrounding the Zomato CEO’s acquisition of the new Aston Martin DB12, HSBC remains steadfast in its ‘Buy’ recommendation for Zomato stock.
In its recent report on Zomato, HSBC presents an optimistic outlook for the company, making key adjustments to order growth rates and revenue projections. The report introduces a revised target price of Rs 200, indicating a notable 25% increase from the previous target of Rs 163.
Furthermore, the report raises the order growth rates for Blinkit to 25.4% from the previous projection of 21.4% for fiscal years 2024 to 2027. Additionally, it adjusts the gross order value (GOV) growth to 27.3%, up from the earlier estimate of 23.2% for the same period.
According to HSBC’s projections, total advertising expenditure in India is anticipated to mirror the nominal GDP growth rate over the next three years, surging from the current USD 13 billion to approximately cUSD 18 billion by fiscal year 2027.
In this expanding advertising landscape, the share of digital advertising is expected to witness substantial growth, climbing from the existing 38% to 44% by fiscal year 2027. However, industry sentiment, as indicated by the IPSOS State of Marketing Report, suggests the potential for an even higher digital advertising share.
Currently, the bulk of digital ad spending (over 80%) is allocated to search platforms such as Google, video platforms like YouTube, and various social media channels including Facebook and Instagram.
While other platforms, particularly e-commerce, currently attract a 15% share of digital spend, the report anticipates Zomato to rise to 18% by fiscal year 2027.
The report emphasizes that digital ads on e-commerce or quick-commerce platforms like Blinkit offer enhanced tracking capabilities compared to other platforms like social media. As a result, spenders are expected to continue shifting their advertising budgets in favor of these easily traceable and effective platforms.