Monday, May 20

Zomato or Paytm? Which Stock is Good For Long Term

Investing in stocks can feel a bit like peeking behind the curtain of a magic show. You know there’s something fascinating going on, but you’re just not sure how it all works. As a self-proclaimed stock market enthusiast, let me be your guide in this magic show, particularly focusing on two hot Indian stocks – Zomato and Paytm.

Analysing Zomato: A Hearty Meal for Your Investment

Back in the day, hunting for good food involved a bit of a treasure hunt. Luckily, with apps like Zomato, the treasure comes to us. But let’s look beyond the plate—should we be hunting for Zomato stocks?

In July 2021, Zomato was listed on the stock exchange. Even in its infancy, the stock looked promising, with an overwhelming response from the market. As an online food delivery service, Zomato has a significant presence in the Indian market, serving a whopping 10,000 cities – the kind of numbers that make my calculator do a double-take. They’ve got the market, they’ve got scale. It’s like a food platter with all your favorite meals, right? Well…hold on to your forks, folks!

A crucial slice of the Zomato pie is its business model. Zomato isn’t just a middleman between restaurants and food lovers, it has its fingers in many pies. From cloud kitchens to eagle-eyed investments in budding startups, Zomato’s diversification strategy is like a buffet – varied, vast, and appetizing. However, like that suspicious sushi on the buffet, Zomato does come with its risk factors. Apparently, making money by delivering ‘Butter Naan’ and ‘Paneer Butter Masala’ isn’t as smooth as it sounds. Profitability remains a hot potato for Zomato, largely due to high operating costs and aggressive expansion plans. These issues might make it a risky choice, but hey, no risk, no return, right?

Paytm: A Digital Wallet or a Wallet Drainer?

Ah, Paytm – the app responsible for making India’s venerable ‘Kiranawalas’ accept digital payments. I remember the bewilderment of my neighborhood grocer when he made his first Paytm transaction. It was as if he had discovered a new magic trick – the magic of digital payments.

Born in 2010, Paytm has had a head start over Zomato. Paytm’s initial journey was a bit like a Bollywood movie—full of drama and plot twists. From being a humble mobile recharge platform to becoming a full-fledged digital wallet and e-commerce platform, Paytm has done it all. Talk about reinventing yourself!

However (and this is a rather big however), Paytm’s stock market debut was less than glamorous. After the initial IPO buzz faded, the Paytm stock nosedived. Investors who bought into the grand premiere were left with a sinking feeling in their stomachs – and portfolios. The reasons? Oh, there are a few. From regulatory issues to ambiguity over the business model – the Paytm stock has brought more questions than answers for investors, making it a bit like that weird, abstract painting you’ve got at home that everyone has a theory about but nobody really understands.

Now, although Paytm has a broad spectrum of services, from payments and banking to e-commerce, it suffers from the same ailment as Zomato – profitability concerns. The company is yet to turn a profit, and this fact is as hard to swallow as a spoonful of unsweetened cocoa powder. Yeah, not that great.

Zomato vs Paytm: The Final Verdict

So, let’s shake our Magic 8-Ball – is it Zomato or Paytm for long-term growth?

If we’re talking consistency, Zomato seems to have a bit of an edge. They’ve focused on their niche and have been expanding progressively within it. Paytm, despite its vast ambit have major competitors in payment segment like Google Pay, Phone Pe and in loan distribution segment Reliance (Jio Financial Services) and Bajaj finance.

On the financial front, both are loss-making, but Zomato’s losses are narrowing down and competition are less, which feels a bit like seeing a glimmer of light at the end of a long, dark tunnel.

Zomato’s reported EBITDA loss is expected to decrease to ₹6 crore in Q2FY24, a significant improvement from the ₹48 crore loss in the previous quarter (Q1FY24). It is noteworthy that Zomato had encountered a loss of ₹307 crore during Q1FY23.

The food aggregator made headlines during the previous quarter when it achieved its maiden consolidated net profit of ₹2 crore, a remarkable turnaround from the ₹186 crore net loss in the corresponding quarter of the previous year. Moreover, Zomato witnessed a surge in revenue from operations, totaling ₹2,416 crore compared to ₹1,414 crore in the year-ago period.

On the other hand, Paytm faced a consolidated net loss of ₹292 crore during the second quarter of FY24. Nonetheless, the company managed to reduce its losses by 49 percent compared to the ₹1,914 crore loss recorded in the corresponding period a year ago. Paytm achieved consolidated revenue from operations of ₹2,519 crore in the September quarter, illustrating a noteworthy 32 percent growth compared to the previous year’s ₹1,914 crore.

Paytm’s EBITDA (earnings before interest, taxes, depreciation, and amortization) loss stood at ₹232 crore in Q2FY24, indicating a lower figure compared to the ₹538 crore loss reported YoY.

However, one must remember that stocks are like rollercoaster rides, not linear trains full of ups, downs, and thrilling turns. A little bit of risk, therefore, is part and parcel of the game. Investing in either Zomato or Paytm could either turn into a fortune cookie or a burnt loaf depending on numerous factors like market conditions, consumer behavior, management decisions, and oh yes, the creepy-crawlies known as regulatory changes.

So there you have it, folks! The magic show reveals that both Zomato and Paytm are performers with their unique tricks. While Zomato seems to have a bit of an edge, that doesn’t mean Paytm isn’t putting up a good show. As investors, your role is to pick the performer who matches your taste, risk appetite, and long-term faith.

Remember, investing isn’t purely about the facts and figures—it involves a good amount of belief, patience, and the rare quality of not panicking when things seem to go south. It’s less about being a fortune teller and more about being a patient gardener, nurturing your investments over the long term. So pick your stocks wisely and enjoy the magic show! Good luck!