Swiggy Shares Plunge 15% on Weak Q2, Analysts Slash Targets

Swiggy Faces Significant Share Price Decline Following Disappointing Q2 Results

The food delivery giant Swiggy sees its shares drop sharply as analysts reassess growth prospects and profitability timelines.

Swiggy’s Q2 Performance: A Closer Look

Swiggy reported a consolidated net loss of ₹922 crore for the September quarter of FY27, a slight improvement from a loss of ₹1,092 crore a year earlier but wider than analysts’ expectations of ₹850 crore. The earnings before interest, tax, depreciation, and amortization (EBITDA) loss reached ₹770 crore, significantly exceeding estimates and reflecting the company’s ongoing challenges in managing costs while expanding its services.

Despite a 36% year-on-year increase in consolidated revenue to ₹7,571 crore, the results were overshadowed by the losses incurred in the quick commerce segment, particularly from Instamart, which is undergoing aggressive growth investments. The gross order value (GOV) for the food delivery business grew by 17.7% year-on-year, but the overall performance has raised questions about Swiggy’s ability to achieve profitability in the near term.

Analysts React: Target Price Cuts and Future Outlook

In light of the disappointing results, several analysts have revised their target prices for Swiggy. Jefferies has reduced its target price from ₹435 to ₹330, citing the necessity of reducing quick commerce losses for a more accurate valuation. The firm anticipates a compound annual growth rate (CAGR) of approximately 19% in food delivery revenue over the next few years, contingent on improved unit economics and cost efficiencies.

Nirmal Bang has also adjusted its expectations, lowering its EBITDA estimates for FY27 and FY28 due to deeper losses in quick commerce and increased spending on platform innovations. Despite these challenges, they maintain a ‘BUY’ rating with a revised target price of ₹340, emphasizing the importance of monitoring competitive intensity and contribution margin trajectories.

Market Implications and Investor Considerations

The significant drop in Swiggy’s share price reflects broader market concerns regarding the sustainability of its business model amid rising competition and operational losses. The company’s ability to pivot and adapt to the evolving landscape of food delivery and quick commerce will be crucial for regaining investor confidence.

Investors should closely monitor Swiggy’s strategic initiatives aimed at improving profitability, particularly in the quick commerce segment, as well as any shifts in consumer behavior that could impact revenue growth. The path to profitability remains uncertain, and the recent performance underscores the risks associated with investing in high-growth, new-age companies.

Key Highlights

• Swiggy shares fell 15% to ₹180.30, marking a significant decline from its IPO price of ₹390.
• The company reported a consolidated net loss of ₹922 crore for Q2 FY27, wider than analyst expectations.
• Revenue increased by 36% year-on-year to ₹7,571 crore, but EBITDA losses were greater than anticipated.
• Analysts have cut target prices, with Jefferies lowering its estimate to ₹330 and Nirmal Bang to ₹340.
• Swiggy’s growth in food delivery is slower compared to competitors, raising concerns about its profitability timeline.

Investor Note: The recent decline in Swiggy’s share price highlights the challenges faced by new-age companies in achieving profitability. Investors should consider the implications of the company’s strategic decisions and market conditions before making investment choices.