Swiggy shares fall 13%, below lowest Street target on Q2 loss; time to sell?

Among foreign brokerages, Goldman Sachs cut its target on Swiggy to Rs 263 from Rs 328 earlier while maintaining an 'Equalweight' rating. HSBC lowered its target to Rs 240 from Rs 315.

CLSA retained its 'Accumulate' rating while cutting its target on Swiggy to Rs 262 from Rs 312. Bernstein slashed its target to Rs 350 from Rs 430. UBS retained its Rs 375 target, while JPMorgan reduced its target to Rs 310 from Rs 360. Citi trimmed its target on Swiggy to Rs 330 from Rs 390.

JM Financial said Swiggy’s Q2FY27 results reinforced its concerns around Instamart’s elusive profitability and Toing’s questionable strategic rationale. Despite Instamart’s net order value (NOV) growth accelerating to 13.4 per cent QoQ, contribution margin deteriorated to minus 1.4 per cent from minus 0.3 per cent in Q1FY27 as growth was driven by customer incentivisation.

"This, along with expanding fixed costs led to widening of adjusted Ebitda losses to Rs 895 crore from Rs 778 crore, highlighting the persistent dilemma of growth versus profitability," JM said.

Ebitda losses swelled to a three-quarter high, which Jefferies said remains a key issue for the stock, with the current price not even factoring in the value of Food Delivery
and current cash. 
"Performance also appears lackluster compared with the market leader, Eternal. We believe a reduction in Q/C losses is essential for true value discovery," Jefferies said.

Nomura said Eternal’s signal around keeping margins stable and reinvesting for growth in the next 12 months could limit Swiggy’s margin expansion.

"Hence, we lower our Ebitda margin expectation for FY28F by 40 bps to 4 per cent, while maintaining our YoY GOV growth expectation of 18 per cent for FY27F and 17 epr cent for FY28F. We continue to believe that FD remains a cash cow for Swiggy and expect it to generate Rs 1300-1900 crore of Ebitda in FY27-28F," Nomura said.