Swiggy shares fall 6% in 2 days despite strong Q1 earnings. Should you buy, sell or hold?

In a filing with the exchange, the company reported a consolidated net loss of Rs 791 crore for the first quarter of FY27, marking nearly a 34% year-on-year decrease from the Rs 1,197 crore net loss reported in the year-ago period.

Also Read |Swiggy shares plunge 6% even as losses narrow. Should investors buy, sell or accumulate?

The company’s revenue from operations, meanwhile, increased more than 37% YoY to Rs 6,812 crore during the April-June quarter of FY27, from Rs 4,961 crore reported in the corresponding quarter of the previous financial year.

Instamart, the company’s quick commerce arm, also saw losses contract to Rs 651 crore in Q1 FY27 from Rs 797 crore in the year-ago period. Its revenue from operations meanwhile soared nearly 53% YoY to Rs 1,232 crore. Instamart’s GOV rose nearly 40% YoY to Rs 7,907 crore, while contribution margin improved 440 bps to 0.2%.

What should investors do?

Motilal Oswal has maintained its Buy rating on Swiggy with a target price of Rs 350, implying an upside of around 18%. The brokerage largely retained its estimates, saying food delivery execution remains steady with expanding margins, while Instamart has largely addressed concerns around contribution margins. It believes the focus will now shift to sustaining GOV growth through higher monthly transacting users, better customer retention and monetisation, while moving closer to EBITDA profitability. Motilal continues to see long-term value in Swiggy's food delivery franchise and brand, although it believes a clear path to quick commerce EBITDA profitability will be key for a meaningful re-rating.

Nuvama has maintained its Buy rating on Swiggy with a target price of Rs 444. The brokerage highlighted that management follows a conservative accounting approach, with no capitalization of employee costs or new-store ramp-up expenses and no payable securitization.

It noted that quarterly margins were impacted by seasonal cost pressures, including annual salary revisions, minimum wage hikes for dark store operations and higher delivery partner costs. Nuvama expects the profitability of the food delivery business to increasingly offset cash burn in the quick commerce segment over the coming quarters.

Also Read |Swiggy contra view: Why JM Financial downgraded the stock to Sell despite strong Q1 results

Domestic brokerage JM Financial turned more cautious, downgrading the stock to Sell from Reduce.

With a target price of Rs 250 per share, analysts forecast over 15% downside from current market levels. The contrarian view comes after a host of international and Indian brokerages issued bullish calls on the counter following the Q1 print.

JM Financial says Swiggy's Q1FY27 results reinforce its view that meaningful profitability improvement in the Instamart business will require greater scale. The brokerage noted that after prioritising contribution margins over the past few quarters, the company has shifted its focus back to accelerating growth.

It highlighted that Instamart's contribution margin was only marginally above break-even in Q1 despite muted quarter-on-quarter NOV growth and expects the metric to remain in negative territory, between 0 and -100 basis points, over the next two quarters.

According to JM Financial, Swiggy has once again shifted its Instamart strategy from improving profitability to accelerating growth after nearly reaching contribution-level break-even. It says the management now aims to deliver at least double-digit sequential NOV growth in Q2FY27 while operating within a 0% to -1% contribution margin range, indicating that elevated investments will continue and adjusted EBITDA losses are likely to remain in the Rs 750-800 crore range in the near term.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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