What is the story about?
Shares of newly-listed e-commerce player Meesho Ltd. are locked in a 10% lower circuit on Monday, December 22. The stock is down for the second straight session and has fallen nearly 15% over the past two trading days, after declining 7% on Friday as well.
The recent decline suggests that some investors may be booking profits following the sharp post listing rally. Meesho’s shares had more than doubled from their IPO price within just over a week of listing.
With Monday’s fall, the stock is now down 21% from its post listing high of ₹254.4. Even so, Meesho shares remain up 82% from the issue price of ₹111.
Meesho’s market capitalisation has now slipped to ₹91,188 crore.
Meanwhile, Swiss investment bank UBS has initiated coverage on the stock with a ‘Buy’ rating and a price target of ₹220 per share.
The brokerage wrote in its note that Meesho’s asset light and negative working capital business model has helped the company generate positive cash flows, unlike many other internet based businesses.
UBS expects Meesho’s net merchandise value to grow at a compounded annual growth rate of 30% between FY25 and FY30. The brokerage estimates that contribution margins and adjusted EBITDA margins, measured as a share of NMV, will steadily improve to 6.8% and 3.2%, respectively, by FY30.
According to UBS, this growth will be driven by a sharp rise in annual transacting users, which are seen increasing from 199 million to 518 million over the same period.
The brokerage also expects annual ordering frequency to improve from 9.2 times to 14.7 times. However, average order values are projected to decline from ₹274 to ₹233 as the company passes on logistics efficiency gains to the broader ecosystem.
Analysts have also flagged Meesho’s limited free float, which could amplify price swings in either direction.
Meesho’s three day IPO, with an issue size of over ₹5,000 crore, had seen strong demand across investor categories. The overall issue was subscribed 79 times, with the retail portion subscribed more than 19 times and the qualified institutional buyers’ quota subscribed 120 times.
Shares of Meesho are currently locked at a 10% lower circuit at ₹201.68, after touching an intraday high of ₹223.65.
The recent decline suggests that some investors may be booking profits following the sharp post listing rally. Meesho’s shares had more than doubled from their IPO price within just over a week of listing.
With Monday’s fall, the stock is now down 21% from its post listing high of ₹254.4. Even so, Meesho shares remain up 82% from the issue price of ₹111.
Meesho’s market capitalisation has now slipped to ₹91,188 crore.
Meanwhile, Swiss investment bank UBS has initiated coverage on the stock with a ‘Buy’ rating and a price target of ₹220 per share.
The brokerage wrote in its note that Meesho’s asset light and negative working capital business model has helped the company generate positive cash flows, unlike many other internet based businesses.
UBS expects Meesho’s net merchandise value to grow at a compounded annual growth rate of 30% between FY25 and FY30. The brokerage estimates that contribution margins and adjusted EBITDA margins, measured as a share of NMV, will steadily improve to 6.8% and 3.2%, respectively, by FY30.
According to UBS, this growth will be driven by a sharp rise in annual transacting users, which are seen increasing from 199 million to 518 million over the same period.
The brokerage also expects annual ordering frequency to improve from 9.2 times to 14.7 times. However, average order values are projected to decline from ₹274 to ₹233 as the company passes on logistics efficiency gains to the broader ecosystem.
Analysts have also flagged Meesho’s limited free float, which could amplify price swings in either direction.
Meesho’s three day IPO, with an issue size of over ₹5,000 crore, had seen strong demand across investor categories. The overall issue was subscribed 79 times, with the retail portion subscribed more than 19 times and the qualified institutional buyers’ quota subscribed 120 times.
Shares of Meesho are currently locked at a 10% lower circuit at ₹201.68, after touching an intraday high of ₹223.65.
