Shares of food delivery company Somato took a sharp tumble a few days ago. As the one-year lock-in period for pre-IPO investors ended, they sold their shares. So it suffered a decline of over 20%.
Somato’s quarterly results released yesterday (Aug 1) showed a 67% increase in revenue. They had announced that the loss had halved compared to last year. The news sent Somato shares soaring 20% overnight today (Aug 2) to hit the upper circuit.
Somato shares have been gaining ground since the beginning of this year. Now these stocks have touched the upper circuit for the first time this year. Investors washed their hands of unprofitable companies due to rising inflation, Russia-Ukraine war and rising crude oil prices. Somato shares have been on a downward spiral since the start of this year through May. With the price reaching Rs 50, many brokerage firms signaled long-term investors to buy. After that, it saw a rise of over 40 percent till June. At that time, it acquired Blinkit, a grocery delivery company, for Rs 4,000 crore. Investors did not like the deal as the company was also unprofitable. Stocks started falling again. Somato’s lock-in period for pre-market investors ended on July 23. Most of them bought Somato shares at 20 rupees and sold as much profit as they came and exited. As a result, the shares fell by more than 20 percent on July 25 and 26 alone.
Meanwhile, Somato has released its earnings for the quarter ended June yesterday. Accordingly, the loss has reduced to Rs.186 crore. The loss in the same quarter last year was Rs 359 crore. Somato’s revenue grew 67.44 percent to Rs 1,413.9 crore.
What are brokerage firms saying?
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Jefferies: In our recent report we noted Somato management’s focus on profitability. The first quarter results show that we underestimated. Adjusted EBITDA loss came in at a low of Rs 150 crore with break even. And order value has also grown in double digits over last quarter. We continue with my recommendation to buy Somato. Target Price: Rs.1,00 (80% growth)
Morgan Stanley
Quarterly results have come in well. The number of monthly transacting users (MTU) has increased significantly. They have also improved the food order value. They do monetization better. We give Overweight rating with a target price of Rs.80. They have said this. Similarly, companies including Goldman Sachs, UBS have also recommended buying Somato shares.
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