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Despite the sharp re-rating of internet stocks, foreign brokerage Morgan Stanley remains logged into internet stocks, preferring Zomato and PB Fintech over other players.
The brokerage noted that all the macro and micro factors are currently aligned for India’s internet stocks.
As the dispersion in the stock returns rises, there is heightened focus on being stock specific and selecting stocks carefully. The way to select stocks is to take into account the operating environment, track record, outlook and valuation.
Based on this, Morgan Stanley favours Zomato and PB Fintech in the internet space, since they are outperforming other internet players
Global brokerage Morgan Stanley retained its ‘overweight’ rating on the counter with a target of Rs 235. The set target implies a probable upside of over 21 per cent.
The brokerage said Zepto raising funding round increases the relevance of Quick Commerce (QC) channel. On Friday, the company announced that it has raised $665 million in a funding round that has doubled its valuations to $3.6 billion. This fundraise marked the biggest financing this year in the QC segment.
Morgan Stanley said there is a probability that the competitive intensity may increase in the segment over the near term.
It noted that assuming competitive intensity increases further, a push out of profitability for Quick commerce business versus the current assumptions is possible.
Of late, stock of the food delivery services firm has been in focus after global brokerage have turned bullish on the counter post its confirmation on initial talks with Paytm to acquire its ticketing business.
Over the past year, Zomato shares have skyrocketed 160 per cent in trade as compared to a 25 per cent rise in the frontline index Nifty 50 during the same time.
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