Swiggy vs Zomato: 5 Key Factors to Consider Before Investing in Food Delivery Stocks

Swiggy's IPO debut exceeded expectations, outperforming analyst forecasts. This new-age food delivery giant is poised for strong growth, similar to its competitor Zomato, which has seen its market cap double since its 2021 listing. The food tech industry has evolved from multiple niche players to a duopoly led by Zomato and Swiggy, both now competing across food delivery, restaurant listings, and quick commerce.

Zomato has edged out Swiggy in market share due to superior execution, particularly in its acquisition of Grofers (now Blinkit), while Swiggy has built its quick commerce service in-house. However, despite Swiggy's early-mover advantage, Zomato has captured the largest share in both sectors.

Financially, Zomato continues to lead with better cost efficiency and market share, while Swiggy is expected to follow Zomato's model of improving operational efficiency. In quick commerce, Zomgy's Blinkit has been gaining ground, but Swiggy lags behind in market share and profitability.

Swiggy's current valuation stands at ₹96,219.66 crore, and its shares have risen 25% from the issue price. Analysts have given Swiggy an "Add" rating with a target price of ₹430 per share, projecting significant sales growth and improved profitability. However, they suggest long-term investors should watch the stock closely, considering short-term volatility. In contrast, Zomato's shares have performed well and have an optimistic outlook, particularly due to its expansion and profitability in the food delivery and Blinkit sectors.

Ultimately, both stocks are viewed as strong contenders in a competitive and fast-growing industry, with Zomato currently holding a larger market share and better profitability, while Swiggy's future success hinges on improving efficiency and profitability in both food delivery and quick commerce.

Swiggy vs Zomato: Which Stock to Buy?

Zomato leads India's food delivery market with a 56%-57% share in FY24, while Swiggy holds 40%. Zomato's acquisition of Uber Eats has helped it overtake Swiggy, positioning it as the dominant player.

1. Food Delivery Business:

Both Zomato and Swiggy saw improvements in key metrics (active users, order frequency) from FY22 to FY24. Zomato outpaced Swiggy, achieving better cost absorption and efficiency. Swiggy, though improving, lags in growth.

2. Quick Commerce:

Swiggy pioneered quick commerce but has lost market share to competitors like Blinkit and Zepto. Zomato gained ground with its Blinkit acquisition, nearing profitability with fewer orders per store.

3. Financials:

Swiggy’s market cap is ₹96,219 crore, with recent price fluctuations. Zomato's stock price has surged, posting significant returns over the last year and since its IPO.

4. Stock Price:

Zomato's shares have risen dramatically, with a 40.5% gain in the last six months. Swiggy’s stock recently peaked, crossing ₹1 lakh crore in market cap.

5. Outlook:

HDFC Securities projects Swiggy’s sales to grow 26% annually with improved earnings over FY24-27. Despite its growth potential, the outcome of quick commerce remains uncertain.

Verdict:

Zomato is better positioned for long-term growth, but Swiggy's improvements make it an interesting option for future gains.