Zomato vs Swiggy: Morgan Stanley Maintains Zomato as Top Pick Despite Swiggy's Overweight Rating
In the fiercely competitive Indian food delivery market, Zomato and Swiggy remain two dominant players. Global investment firm Morgan Stanley recently initiated coverage on Swiggy with an ‘Overweight’ rating, yet reaffirmed its confidence in Zomato—which trades under the name Eternal—as its top investment pick.
While both companies show growth potential in food delivery and quick commerce, Morgan Stanley’s stance signals a clear preference for Zomato based on current market dynamics and financial strength.
Why Morgan Stanley Favors Zomato
Morgan Stanley has maintained its Overweight rating on Zomato with a target price of ₹320, pointing to several fundamental strengths:
Dominant Market Share: Zomato leads the Indian food delivery space with a 58% share in Q1 FY25, ahead of Swiggy’s 42%.
Strong Financial Performance: Zomato has consistently posted strong quarterly earnings, backed by operational efficiency and reduced customer acquisition costs.
Quick Commerce Growth: Its quick commerce arm, Blinkit, has grown rapidly and now commands a 46% market share, compared to Swiggy’s Instamart.
Low Dilution Risk: Zomato’s funding position is stable, minimizing the need for future equity dilution and preserving shareholder value.
Swiggy's Overweight Rating: What It Means
Swiggy has received an ‘Overweight’ rating from Morgan Stanley, indicating it is expected to outperform the market average. Reasons include:
Improved Unit Economics: Swiggy has narrowed its losses through better cost control and improved delivery efficiencies.
Quick Commerce Momentum: Instamart is growing steadily, increasing Swiggy’s presence in the high-potential quick delivery market.
Investor Interest Ahead of IPO: The positive rating may boost investor confidence as Swiggy prepares for its much-anticipated initial public offering.
However, Swiggy still lags behind Zomato in terms of scale, profitability, and market penetration in tier 2 and 3 cities.
Zomato vs Swiggy: A Comparative Snapshot
| Key Metric | Zomato (Eternal) | Swiggy |
|---|---|---|
| Food Delivery Market Share | 58% | 42% |
| Quick Commerce Market Share | 46% (Blinkit) | 25% (Instamart) |
| Brokerage Rating | Overweight | Overweight |
| Listed Status | Publicly listed | Pre-IPO |
| Target Price | ₹320 | Not disclosed |
Investment Outlook for 2025
Zomato is expected to consolidate its leadership in both food delivery and quick commerce while maintaining a healthy balance sheet.
Swiggy may see accelerated growth post-IPO but will need to improve profitability and deepen penetration to catch up with Zomato.
Despite a positive view of both firms, Morgan Stanley has clearly positioned Zomato as the more stable and scalable long-term play for investors.
Frequently Asked Questions (FAQs)
Q1: Why does Morgan Stanley prefer Zomato over Swiggy?
Morgan Stanley sees Zomato as more stable due to its strong earnings, lower equity dilution risks, and leading market share in both food delivery and quick commerce.
Q2: What does an 'Overweight' rating mean for Swiggy?
An 'Overweight' rating implies that the stock is expected to perform better than the sector average over the next 12 months.
Q3: What is the current market share comparison between Zomato and Swiggy?
Zomato holds a 58% market share in food delivery, compared to Swiggy’s 42%. In quick commerce, Blinkit (Zomato) leads with 46% share, while Instamart (Swiggy) has about 25%.
Q4: Is Swiggy planning to go public soon?
Yes, Swiggy is reportedly preparing for an IPO. The exact timeline has not been confirmed, but the Overweight rating could signal strong investor appetite.
Q5: What is the significance of Zomato's ₹320 target price?
The target price reflects Morgan Stanley’s confidence in Zomato’s future growth and profitability, based on its Q1 FY25 performance and strategic market dominance.
Conclusion
The competition between Zomato and Swiggy continues to drive innovation and expansion in India’s food and quick commerce markets. While Swiggy is gaining investor confidence ahead of its IPO, Morgan Stanley’s ongoing preference for Zomato highlights the latter’s stability, scalability, and financial maturity. For investors looking at long-term opportunities in digital consumption, Zomato remains the top pick—at least for now.
Published on : June 04,2025
Uploaded by : PANKAJ