JM Financial turned more cautious on Swiggy, downgrading the stock to Sell from Reduce with a target price of ₹250 per share, forecasting over 15% downside from current market levels. This contrarian view comes despite Swiggy reporting better-than-expected first quarter earnings and sharply narrowing losses. The brokerage's downgrade contrasts sharply with Elara Capital's earlier downgrade to Accumulate with a target price of ₹350, highlighting the divergent analyst perspectives on the food delivery platform's profitability trajectory.
Swiggy delivered robust financial results for Q1 FY27, with revenue from operations increasing more than 37% YoY to ₹6,812 crore during the April-June quarter, up from ₹4,961 crore in the corresponding quarter of the previous financial year. The company's Instamart quick commerce arm saw losses contract to ₹651 crore in Q1 FY27 from ₹797 crore in the year-ago period, while its revenue from operations soared nearly 53% YoY to ₹1,232 crore. Instamart's Gross Order Value (GOV) rose nearly 40% YoY to ₹7,907 crore, with contribution margin improving 440 basis points to 0.2%.
JM Financial's downgrade reflects concerns over Instamart's profitability trajectory, with analysts noting that meaningful profitability improvement will require greater scale. The brokerage highlighted that after prioritising contribution margins over the past few quarters, the company has shifted its focus back to accelerating growth. JM Financial expects Instamart's contribution margin to remain in negative territory, between 0 and -100 basis points, over the next two quarters, despite the current improvement. The brokerage also raised concerns about sharp rise in losses and customer overlap with the core food delivery business affecting capital allocation and long-term value creation potential.
The latest downgrade adds to the mixed Q1 FY27 earnings that have created divergent views across different sectors. While some companies showed strong performance, others faced challenges that influenced analyst recommendations. Morgan Stanley maintains its Overweight rating on Mahindra & Mahindra with a target price of ₹4,222, demonstrating continued confidence in the automaker's prospects despite mixed quarterly earnings. The contrasting views on Swiggy reflect the ongoing debate among analysts about the food delivery platform's path to profitability and the long-term viability of its diversification strategy.
