Shares of Indian e-commerce platform Meesho Ltd. experienced a significant rally, climbing 12% in early trading today. The surge follows an announcement from global brokerage UBS, which raised its price target for Meesho stock by 24% to ₹260, up from its previous target of ₹210. This new target suggests a potential upside for investors.
Following the news, Meesho's shares reached ₹244.80, contributing to the online retail firm's market capitalization rising to ₹1.11 lakh crore. The stock has demonstrated robust performance recently, with a 38% increase over the last three months and an impressive 65% gain over the past six months.
UBS Cites Stronger Growth and Profitability Drivers
UBS's revised outlook is based on elevated medium-term growth estimates for Meesho, encompassing stronger expectations for both revenue expansion and margin improvement. While the brokerage's FY27 estimates remain largely consistent, it has notably increased its net merchandise value (NMV) forecasts for FY29-FY31 by 7-18%.
Parallel to the NMV adjustments, UBS also made an upward revision to its contribution profit estimates. Furthermore, the brokerage's EBITDA projections for FY29-FY31 have seen a substantial increase, ranging from 20-40%.
Key Factors Driving Optimism
- Expanding User Base: The higher NMV forecasts are underpinned by the continued growth in Meesho's seller and buyer base. In Q1FY27, the number of sellers on the platform grew by 81% year-on-year, reaching 1.04 million. Concurrently, the buyer base expanded by 29% year-on-year to 274 million.
- Operational Efficiencies: UBS anticipates that improving monetization from advertising services and enhanced logistics economics will play a crucial role. These factors are expected to drive operating leverage and support stronger profitability for Meesho in the coming years.
- Platform Growth: The rapid increase in stock-keeping units (SKUs) and a growing network of logistics partners are also expected to bolster the platform’s growth momentum over the medium term.
The sharper rise in EBITDA estimates specifically reflects expectations of a more favorable margin trajectory, indicating confidence in Meesho's ability to convert revenue growth into increased profits.