Swiggy stock price climbed over 14% to ₹612.30 on Monday, December 16, marking a fresh all-time high. This sharp rally came after Axis Capital initiated coverage with a ‘Buy’ rating and set a target price of ₹640, reflecting a 20% upside from its previous closing price of ₹532.35.
The brokerage’s positive stance highlights Swiggy’s strong growth trajectory, especially in the food delivery and quick commerce segments, where the company holds a significant market position. The favorable outlook has instilled renewed investor confidence, fueling the stock’s upward momentum.
Swiggy’s Competitive Position and Valuation Discount to Zomato
Axis Capital emphasized Swiggy’s standing as India’s second-largest player in food delivery and quick commerce. While Zomato maintains the lead, Swiggy’s growth trajectory remains impressive. The brokerage noted that Swiggy trades at a 27% valuation discount compared to Zomato.
This valuation gap, according to Axis Capital, is justified given Swiggy’s current growth stage and strategic positioning in the market. However, the underpenetration of food delivery and quick commerce sectors in India creates significant opportunities for future expansion.
Key Drivers of Swiggy’s Growth
Swiggy’s sustained expansion and improving financial outlook stem from strategic initiatives, especially in quick commerce, combined with effective cost optimization. Key growth drivers highlighted by Axis Capital include:
- Quick Commerce Expansion
Swiggy’s Instamart business continues to gain momentum as consumer demand for quick deliveries grows. By scaling operations and streamlining delivery logistics, Swiggy has strengthened its foothold in this high-potential segment. - Cost Management
Swiggy has implemented rigorous cost optimization measures across both fixed and variable expenses. This includes operational efficiencies, fleet management improvements, and vendor partnerships, all of which contribute to margin expansion. - Revenue Growth from Advertising and Brand Commissions
Swiggy is increasingly monetizing its platform through brand partnerships and advertising revenues within Instamart. Axis Capital projects these income streams will play a crucial role in driving overall revenue growth.
These factors collectively position Swiggy to sustain its competitive edge while improving profitability metrics over the long term.
Path to Profitability: EBITDA Forecast
Axis Capital forecasts that Swiggy will achieve a significant turnaround in profitability, projecting an adjusted EBITDA of ₹390 crore by FY27, a remarkable improvement from the anticipated loss of ₹1,840 crore in FY24.
The shift toward profitability is underpinned by:
- Cost Optimization: Streamlining operations to improve margins.
- Revenue Diversification: Increased focus on advertising revenue and brand partnerships.
- Operational Efficiency: Scaling Instamart and improving order fulfillment processes.
Swiggy’s progress toward profitability signals its ability to navigate challenges and capitalize on market opportunities effectively.
Block Deal Activity Fuels Trading Interest
On Monday, approximately 11.1 lakh Swiggy shares exchanged hands in early trade through a block deal. While the parties involved remain undisclosed, the block deal sparked further interest among investors, reinforcing confidence in Swiggy’s upward trajectory.
Large block deals often signify institutional interest, reflecting strong buying activity and optimism for the company’s growth prospects. This transaction added to the positive sentiment surrounding Swiggy’s stock.
Technical Analysis: Bullish Momentum Continues
Swiggy’s stock performance reflects robust bullish momentum on technical indicators. Key signals include:
- Exponential Moving Averages (EMAs)
Swiggy’s shares are trading above all major EMAs, including the 20-day, 50-day, and 200-day averages. This confirms strong upward momentum and suggests the stock is in a clear uptrend. - Relative Strength Index (RSI)
The RSI, hovering near 61, indicates that Swiggy’s stock has room for further gains without entering the overbought zone (above 70). This provides a favorable technical setup for continued upward movement. - Volume Patterns
The sharp rise in trading volumes, coupled with the price increase, reinforces the strength of the ongoing rally. Higher volumes during uptrends are typically seen as a confirmation of investor confidence.
Long-Term Potential in Quick Commerce and Food Delivery
Swiggy’s expansion into quick commerce through Instamart positions it strategically in one of the fastest-growing segments in India’s digital economy. As consumer preferences shift toward convenience, demand for 10-15 minute deliveries is expected to accelerate.
According to industry estimates, the quick commerce market in India could reach $5 billion by 2025, offering significant growth potential for players like Swiggy. By scaling its operations and improving delivery efficiency, Swiggy is well-placed to capture a substantial share of this market.
In the food delivery segment, Swiggy continues to compete aggressively with Zomato, leveraging its user-friendly platform, extensive restaurant partnerships, and growing customer base. India’s food delivery market remains underpenetrated, with vast untapped opportunities in tier 2 and tier 3 cities.
Leadership and Strategy: Key to Success
Axis Capital praised Swiggy’s leadership team for its ability to execute strategic initiatives effectively. Under their guidance, Swiggy has demonstrated resilience in navigating market challenges while maintaining a focus on long-term growth and profitability.
Swiggy’s leadership has successfully implemented:
- Operational Efficiencies: Enhancing delivery infrastructure and reducing costs.
- Revenue Diversification: Building multiple income streams, including advertising and brand commissions.
- Strategic Partnerships: Collaborating with vendors and institutions to strengthen market presence.
These strategies have enabled Swiggy to position itself as a formidable player in the competitive food delivery and quick commerce markets.
Conclusion: Positive Outlook for Swiggy’s Future
The sharp rally in Swiggy’s stock, triggered by Axis Capital’s bullish outlook, reflects strong investor confidence in the company’s growth trajectory. With a target price of ₹640, representing a 20% upside, Swiggy is poised for continued gains.
Key factors driving this optimism include:
- Rapid Expansion in the quick commerce segment.
- Improved Cost Management leading to better margins.
- Revenue Diversification through advertising and partnerships.
- Strong Leadership and strategic execution.
Swiggy’s path to profitability, with projected adjusted EBITDA of ₹390 crore by FY27, marks a significant turnaround from its current losses. The company’s ability to capitalize on underpenetrated markets, combined with its technical strength and growing demand, positions it as a leading player in India’s evolving digital economy.
As Swiggy continues to scale operations and innovate within its business verticals, it remains well-placed to deliver sustained value for investors in the coming years. With favorable market dynamics and robust growth strategies, Swiggy’s stock is likely to remain a preferred choice for investors seeking exposure to India’s high-growth tech sector.
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