Swiggy share price rallies over 7% in biggest intraday gain in a month. Should you buy?
Swiggy share price in focus today: Swiggy, the popular food delivery and quick commerce platform, saw its shares surge 7.3% in intraday trade on Wednesday, June 4, touching a four-week high of ₹357 apiece, marking its biggest single-day gain in a month as sentiment turned positive after global brokerage firm Morgan Stanley initiated coverage on the stock with an ‘Overweight’ rating and a target price of ₹405 per share.
One of the key drivers for the positive outlook is Swiggy’s improved execution in food delivery, where it has marginally regained market share over the last few quarters. While the overall food delivery market has slowed down, the brokerage believes that the company can still deliver gross order value (GOV) growth at a 15.8% CAGR during FY25–28E, along with improving margins in the business.
In addition, the brokerage highlighted Swiggy’s strategic investments in quick commerce, which it expects will regain some market share and grow GOV at a 63% CAGR over FY25–28. The pace of new customer additions in the Q-commerce segment in recent quarters has led the brokerage to revise the total addressable market (TAM) for India’s QC industry upwards to USD 57 billion by 2030 (from USD 42 billion earlier), projecting Swiggy to maintain its 22% market share by FY31E.
The brokerage anticipates contribution margin breakeven for the QC business by 1HFY27 and adjusted EBITDA breakeven by 2HFY29, despite forecasting over USD 1.2 billion in cumulative losses during the investment phase.
Morgan Stanley also highlights that while the market appears to be pricing in Swiggy’s QC-related cash burn, it does not adequately value the upside potential from that business. The firm values Swiggy’s food delivery segment at ₹194 per share and estimates the QC segment could be worth ₹197 per share, suggesting a 22% upside from the stock’s Monday closing price.
The company’s balance sheet strength, driven by profits from food delivery and treasury income, is seen as adequate to fund QC expansion without immediate dilution risk.
Furthermore, Swiggy’s concerted efforts to improve operational efficiency, launch innovative services like 10-minute food delivery (Bolt), and make strategic senior-level hires add confidence to its turnaround story.
However, the report also outlines several key risks, including the threat of weaker execution, which could result in market share losses in both QC and food delivery. Swiggy’s QC segment, still in investment mode, faces high competitive intensity, which could push losses higher than expected and trigger further capital requirements.
Swiggy share price trend
After being under pressure for four consecutive months, the stock took a brief breather in May, ending the month with a marginal gain of 5%. In the current month so far, it is up by 7%.
Swiggy had an upward momentum for two months following its listing on November 13, ₹420, above the issue price of ₹390 per share”>debuting with a 7.7% premium at ₹420, above the issue price of ₹390 per share. However, it subsequently came under sustained selling pressure, which drove the stock down to an all-time low of ₹297 apiece.
At current levels, the stock is trading 16.7% below its issue price and 10.25% below its IPO price.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
