Meesho Slides 40% from Peak, Slips Below Listing Price: Here’s Why Brokerages Still See 26% Upside
Shares of e-commerce firm Meesho have witnessed a significant decline, dropping approximately 12% over the past week following disappointing third-quarter earnings. Despite the downturn, several leading brokerages maintain an optimistic outlook, projecting an upside of up to 26%.
Key Financial Highlights
– Konsolidated Net Losses: In Q3, losses surged nearly 13-fold to Rs 491 crore, compared to Rs 37 crore in the same quarter last year.
– Stock Performance: Initially listed in December at Rs 162, the stock saw a strong debut with a 46% premium over the issue price of Rs 111. After reaching a peak of Rs 254 on December 18, it has since reversed nearly 40%, currently trading around Rs 151.
– Revenue Growth: Meesho reported a year-on-year revenue increase of 32% in Q3 FY26, totaling Rs 3,518 crore compared to Rs 2,674 crore in the previous year. Sequential losses also rose from Rs 411 crore in Q2 FY26.
Despite slipping below its listing price, brokerages see potential growth drivers for Meesho.
What Brokerages Recommend
– UBS:
– Maintains a Buy rating with a target price of Rs 220, indicating a 26% upside from its current price.
– Projects that profitability will recover over the next two quarters, attributing recent margin declines to temporary issues such as the merger of two major third-party logistics (3PL) providers.
– BofA Securities:
– Holds a Neutral stance but notes a 9% upside with a target price of Rs 190.
– Highlights that while Q3 revenues exceeded expectations, Meesho is focused on balancing its logistics operations between its in-house arm, Valmo, and external partners based on cost efficiency.
Factors Supporting Growth
– Network Challenges: The decline in contribution margins has been influenced by one-off factors related to logistics restructuring, which are expected to normalize soon.
– Ad Revenue and Services: Meesho’s management anticipates steady ad revenues and margin improvements through value-added services, coupled with logistics costs stabilizing.
Conclusion
In summary, despite Meesho’s recent stock decline, including slipping below its initial listing price, brokerages remain bullish, focusing on the company’s growth potential and strategic changes in logistics and revenue generation. With targeted upside projections, investors may find opportunities in Meesho’s anticipated recovery over the coming quarters.