Swiggy in the Spotlight: HSBC’s Downgrade Fuels Doubts-Will Rivals Feast on Its Market Share?

Image Source: The Economic Times

Swiggy Ltd. (SWIG.NS) stock fell under new pressure following HSBC reducing its target price to ₹350 from ₹385, citing increasing wariness about the firm's near-term prospects in India's high-stakes quick commerce and food delivery space. The action indicates that even market leaders are not spared from the intense competition and margin pressures redefining the space.

Key Highlights:

HSBC's Downgrade: HSBC kept its 'Hold' call on Swiggy but reduced the target to ₹350, blaming sustained competitive headwinds as well as decelerated growth in food delivery and quick commerce. The new target is below Swiggy's IPO price of ₹390, highlighting a conservative approach.
Stock Performance: Swiggy's shares have fallen to approximately ₹336, down more than 45% from its post-listing high and far below its IPO listing. The decline in the stock indicates investors' fears that the company cannot get back on track and achieve sustainable profitability.
Competitive Pressures: HSBC pointed out that new entrants such as Amazon Tez and Zepto are increasing price wars, which result in deep discounting and compressing Swiggy's margins. The brokerage expects gross order value (GOV) growth to slow down, with consensus food delivery growth estimates reduced to 12-15%.
Profitability Outlook: Although Swiggy is a market leader, HSBC does not see EBITDA break-even prior to FY2028, considering the industry's tough economics and continued investments in growth.
Analyst Sentiment: Out of 19 analysts covering Swiggy, 12 have a 'Buy', three 'Hold', and four 'Sell', indicating a polarized opinion on the future trajectory of the company.

With Swiggy contending with fierce competition and margin pressures, investors are looking for strategic initiatives to revive growth and profitability.

Sources: CNBC TV18, Economic Times, Moneycontrol, Motilal Oswal