Meesho slides 40% from peak, slips below listing price. Here is why brokerages still see 26% upside

Shares of e-commerce firm Meesho have slid about 12% over the past week after its Q3 earnings disappointed the Street. Consolidated net losses for the December quarter ballooned nearly 13-fold to Rs 491 crore, compared with a loss of Rs 37 crore in the year-ago period. The stock has also slipped below its listing price after an initially strong debut, amid concerns over growth sustainability. However, a couple of leading foreign brokerages continue to see silver linings, pointing to factors that could still work in the company’s favour.

Meesho was listed in December at Rs 162 on the NSE, marking a 46% premium over the issue price of Rs 111. After rallying sharply to a peak of Rs 254 on December 18, the stock has since reversed nearly 40% and is now hovering around Rs 151, its Thursday closing price. Notably, Meesho had turned into a 129% multibagger within just seven sessions of listing before entering the current downtrend.

The December-listed e-commerce company reported a 32% year-on-year jump in revenue in Q3FY26 to Rs 3,518 crore versus Rs 2,674 crore in the corresponding quarter of the last financial year.

The company’s losses rose on a sequential basis as well, climbing from Rs 411 crore in Q2FY26, while the topline recorded a 14% quarter-on-quarter growth versus Rs 3,074 crore in the July-September quarter.

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What brokerages recommend

Swiss brokerage UBS has maintained a Buy rating on Meesho with a target price of Rs 220. The stock was recommended at a price of Rs 173, implying a 26% upside.
“The topline growth was strong but profitability was impacted by one-off factors and is expected to revert back in the next two quarters,” the note said. UBS attributed the decline in contribution margin by 110 bps in Q2 and a further 100 bps in Q3, with an additional 16 bps impact due to network restructuring. “This impact was largely one-off and driven by the merger of two of the largest 3PL players, Delhivery and Ecom, into a single entity, which temporarily constrained the availability of 3PL providers for Meesho. As a result, Meesho accelerated the expansion of its in-house logistics arm, Valmo, leading to short-term network inefficiencies and higher costs,” the brokerage noted, adding that management expects these costs to normalise over the next two quarters.

UBS also highlighted management’s expectation of steady-state ad revenues of 5.5-6%. Margin improvement is expected to be driven by ads and other value-added services, while the logistics premium is likely to remain range-bound at 2-2.5% of net merchandise value.

BofA Securities has retained a Neutral view on the stock, though it sees a 9% upside, implying a target price of Rs 190. The stock was recommended at Rs 174.

The company’s Q3 revenues were ahead of BofA’s estimates.

The US brokerage is of the view that Meesho will continue to decide the right mix between Valmo and 3PL partners based on the lowest cost structure.

“Some capacity at Valmo was built at a very fast pace and was not optimised for costs. The company will fix this and then start to scale up Valmo again. Incremental costs from Q2 and Q3 are expected to normalise over the next two quarters, with operating leverage benefits from investments made across technology, marketing and logistics scale-up,” the note said.

According to BofA, Meesho’s growth over the next three to four years is expected to be led by faster expansion in annual transacting users rather than an increase in transaction frequency. The brokerage noted that first-year users typically transact less compared with more mature cohorts, with the top quartile of Meesho’s users clocking an average annual frequency of over 20 transactions. BofA added that the company is likely to maintain its logistics margin within a 2-2.5% contribution margin range on net merchandise value, with any gains from operational efficiencies expected to be passed on to users.

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