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Eternal Ltd’s stock fell for 18 consecutive sessions till Friday, losing nearly a quarter of its value to ₹216. It is rare for a Nifty50 index constituent to have such a long losing streak.

It has recovered by about 11% to ₹242 over the last three trading sessions, probably after JM Financial Institutional Securities reiterated its target price on the stock at ₹400 with largely unchanged earnings estimates. It also helps that broader markets have gained in the past three sessions.

What are investors concerned about? Certainly, the management change cannot be the cause because the stock recovered its early loss after the 21 January announcement of a leadership change, when Albinder Dhindsa replaced Deepinder Goyal as CEO.

The competitive intensity from Zepto, Amazon and Flipkart in quick commerce has been known for a while now. This effectively means that the Street wasn’t concerned about the new management’s ability to take on competition.

The LPG cylinder shortage for restaurants began much later, on 27 February, after the West Asia conflict broke out, while the stock’s losing streak had begun on 17 February. For Zomato, concerns around supply-side disruptions linked to gas availability issues might be overstated as long as there are no mass-scale shutdowns.

This leaves us with only two reasons for the sustained pressure on the stock. One is the likely entry of Flipkart in the food delivery business with reported pilot runs in Bengaluru between May and June. JM Financial’s analysts though believe investor concerns around Flipkart entering the sector, and Rapido-owned Ownly expanding operations are premature.

“Dislodging the deeply entrenched duopoly of Zomato and Swiggy requires more than just capital; it demands a massive restaurant and logistics network and meaningful investments in brand to shift consumers from one platform to another,” said JM’s report on Monday. New entrants may face steep customer acquisition costs and significant gestation periods before they can eat into the market leaders’ profitability or dominant market share.

The other reason could be agentic AI—an artificial intelligence system that can perform tasks that human agents can do. For instance, a customer may not have the time to check and compare prices, delivery timelines of a particular product available on various platforms such as Blinkit, Instamart, Zepto. Agentic AI might be able to compare prices and delivery timelines of the product on multiple platforms, and even place the order on behalf of the user.

If users find this option, they may not stay loyal to one platform. Here, the risk of losing loyal customers could be higher for Blinkit as it is the dominant player in quick commerce.

While JM Financial believes that Eternal’s EV/Ebitda multiple of 23x based on FY28 estimates is attractive, investors must assess if there is any downside risk to the Ebitda projected at ₹8,680 crore. This is far higher than Motilal Oswal Financial Services and ICICI Securities’ FY28 Ebitda estimates at ₹5,900 crore and ₹7,153 crore, respectively.

A breakdown of JM’s consolidated Ebitda projection shows that it expects almost equal Ebitda from Zomato and Blinkit. The risks to Zomato’s estimates are lower given limited competition, while Blinkit’s estimates are exposed to a higher risk as e-commerce companies enter quick-commerce. Investors may be tempted to buy into the stock as valuations have come off, but they need to watch out for potential threats from agentic AI.

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