Meesho share price: Meesho shares saw healthy buying on September 22 after global brokerage UBS raised its target price on the ecommerce stock on the back of improved profitability and better medium-term growth outlook. UBS has raised its target price to Rs 260 from Rs 210, but has maintained its rating on the stock.
This update has come in spite of Meesho which is working on further growing its ecosystem of sellers and customers and expanding monetisation of advertising services and improving logistics productivity. UBS has also raised the company’s NMV, contribution profit and EBITDA estimates over the longer term.
Meesho Share Price Jump As UBS Revises Target
Meesho counters surged significantly in the trade today, rising up to Rs 244.80 as compared to Rs 219.05.00 that was the previous close, a gain of more than 12%. The market capitalisation of the company stood at around Rs 1.11 lakh crore.
The stock has also given good momentum over recent periods, with the Business Today report indicating gains of 38% in three months and 65% in six months. The latest update came after UBS increased its view on Meesho’s medium-term financial outlook.
UBS Raises Meesho Long-Term Growth Estimates
Although UBS has broadly held its FY27 forecast constant, it has significantly upgraded its FY29-FY31 forecasts.
The brokerage has revised up its net merchandise value (NMV) estimates for FY29-FY31 by c.7% to 18%, while contribution profit estimates are also revised up by a similar range. EBITDA estimates are revised up for FY29-FY31 by c.20% to 40%.
The real estate and employment numbers suggest that UBS expects Meesho’s profitability trend to improve more significantly as it scales its platform over the medium term and realizes operating efficiencies.
Seller and Buyer Growth Supports Meesho’s Expansion
The driving force behind this revised outlook has been the growth of Meesho’s user and seller base.
In Q1 FY27, Meesho’s annual transacting seller base was up 81% YoY to 1.04 Mn. The number of transacting customers on an annual basis increased 29% YoY to 274 million.
A broader mix of sellers and buyers is fueling its growth, with a growing range of products (SKUs) and the logistics network. UBS reckons these should fuel Meesho’s transaction growth in the next several years.
Advertising Revenue Could Boost Margins
Advertising monetisation has become a key probable growth engine for Meesho.
With more merchants on the platform, the business has a chance to earn more from advertising and marketing. UBS anticipates that an acceleration in monetisation in this segment will drive operating leverage.
Other revenue growth can help improve margins if operating costs do not scale up with it. Since UBS’s EBITDA estimates are higher, this suggests that Meesho is expected to slowly translate scale into profitability.
Logistics Efficiency Remains Important
An additional reason for UBS’s brighter outlook is logistics economics.
The business model of Meesho is becoming increasingly reliant on a robust delivery setup – as the number of transactions and listed products on the platform keep growing. Optimisation of logistics costs can have an impact on contribution margins.
UBS anticipates an improved logistics economics, along with advertising monetisation, to enable a stronger margin profile over the medium term.
Meesho Q1 FY27 Performance
Meesho’s recent quarterly update was also factored into the revised brokerages’ estimates.
Market reports stated that the net merchandise value for the company during Q1 FY27 grew 34% on a year-to-year basis to Rs 11,614 crore. Revenue from operations increased 48% on a year-to-year basis to Rs 3,713 crore, while the company’s EBITDA loss was Rs 224 crore.
Contribution margin was also up during the quarter, at 4.6% of NMV. These operating improvements set the stage for a question – can Meesho continue to grow its profitability alongside rapid transaction growth?
What the Revised Meesho Target Price Means
UBS increases Rs260/Meesho target price (original Rs210 target valuation, +24%) The brokerage’s new estimates are mainly driven by an upgrade to NMV growth, contribution profit and EBITDA in FY29-FY31.
But the target price is nothing but a brokerage estimate, not a future price of the security. Investors holding Meesho shares will have to keep an eye on the user base growth, sellers number, spend on logistics, advertising income & margin numbers over the next few quarters.
Key Metrics to Watch for Meesho Shares
Meesho’s next chapter of growth will be determined not just by scale, but by the profitability of each transaction.
The main metrics to monitor are: NMV growth, annual transacting buyers, seller addition, contribution margin, logistics costs and advertising monetisation. If these key metrics continue to improve, that would be significant insight into our longer-term business operating path.
For now, UBS’ altered estimates point to mounting anticipation about Meesho’s potential to strike a balance between scale and widening margins. The Rs 260 target price will be more focused on whether the company’s widening marketplace and widening operating efficiencies can earn it better numbers in the coming years.
Disclaimer: This article is intended for informational purposes only and should not be construed as investment advice. Stock prices and brokerage target can fluctuate; investors should do their own due-diligence or consult a professional financial adviser before making any investment.
