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nykaa share price: Nykaa shares slip below IPO issue price. Should you buy the dip?

Having eroded over 56% of shareholder wealth from its 52-week high, shares of new-age beauty and fashion retailer on Tuesday hit a record low to slip below its IPO issue price of Rs 1,125.

As investors continued to dump Nykaa or FSN E-Commerce Ventures ahead of the mandatory lock-in expiry date for pre-IPO investors on November 10, the stock was down 2% in trade at the day’s low of Rs 1,120.25.

Among all the new-age stocks that listed on Indian stock exchanges recently, Nykaa was among the best-performing ones as it had nearly doubled on listing day in November last year.

While investors have been dumping Nykaa on account of rising competition in the e-commerce market, brokerages remain bullish on the stock with the average target price of Rs 1,664, signalling an upside potential of up to 45.5%.

Global brokerage firm Nomura, which recently initiated coverage on the stock with a target price of Rs 1,365, said the risk-reward is quite favourable for long-term investors with the potential for the stock to double over the next five years.

“It is quite unique compared with most online companies due to its strong focus to curate brands and help customers in their discovery journey. Brands see it as a key partner in educating customers and driving adoption of premium products,” Nomura said.

Domestic brokerage , which has given a buy call on the stock for a target price of Rs 1,780, said the risk-reward ratio for Nykaa is seen to turn favourable for the medium to long term.

“Nykaa’s BPC business is actually deserving of a higher multiple than DMart due to better margin profile and asset-light nature. While the current market price of Nykaa still implies strong valuations when compared to most traditional companies, that does not factor in the growth seeds that Nykaa is planting by investing in Fashion and eB2B segments,” the brokerage said.

Out of 17 analysts with a coverage on the stock, a majority 11 of them have buy ratings.

“Nykaa continues to invest in growing new businesses along with having resilient unit economics of BPC and fashion vertical driven by focus towards driving higher conversion and quality traffic. Further, investments in the differentiated value proposition of content, curation and convenience are yielding results,”

said.

The domestic brokerage has a hold rating on the stock with a target price of Rs 1,250.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)


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