Business

IIE DIGITAL DESK ; New Delhi, October 29: Shares of e-commerce platform Meesho came under pressure in Thursday's trade despite the company reporting a significant reduction in its second-quarter loss and strong revenue growth. The company's net loss narrowed by nearly 68 per cent year-on-year to Rs 132.4 crore in the July-September quarter of the 2026-27 financial year (Q2 FY27), while revenue from operations increased by around 34 per cent to Rs 4,131.6 crore. However, investors remained focused on the company's path to profitability, operating costs and the sustainability of its growth.

Meesho shares fell nearly 3 per cent during Thursday's morning trade, touching around Rs 222 per share, according to market reports. The stock's movement came even as the latest financial results showed a substantial improvement in the company's year-on-year loss. The mixed market reaction reflects the debate over whether Meesho's expanding business and improving operating metrics will translate into sustainable profits over the coming quarters.

Meesho reported a consolidated net loss of Rs 132.4 crore for the September quarter, compared with a loss of approximately Rs 411.4 crore in the corresponding quarter last year. This represents a reduction of around 68 per cent, indicating a considerable improvement in its reported bottom line on a year-on-year basis.

Revenue from operations climbed to Rs 4,131.6 crore from Rs 3,073.7 crore in Q2 FY26. The growth highlights the continued expansion of the company's value-focused e-commerce business, which attracts consumers looking for affordable products across a wide range of categories.

Expenses also continued to rise as the business expanded. Meesho's total expenses increased by approximately 24 per cent year-on-year to Rs 4,382.3 crore, compared with Rs 3,540.4 crore in the same quarter last year. The company therefore continues to face the challenge of balancing customer acquisition, platform development and operational investment with the need to improve profitability.

On a sequential basis, the net loss remained broadly stable compared with the Rs 132.8 crore loss recorded in the April-June quarter. Revenue from operations, meanwhile, increased from approximately Rs 3,712.8 crore in Q1 FY27 to Rs 4,131.6 crore in Q2. The figures suggest that business activity continued to expand, although the improvement in quarterly revenue has not yet translated into a meaningful reduction in the absolute net loss compared with the previous quarter.

Global brokerage Jefferies has maintained its 'Buy' rating on Meesho shares while raising its target price to Rs 285 from Rs 240. The revised target reflects the brokerage's confidence in the company's growth prospects, improving contribution margins and potential for better operating efficiency. The target price suggests an upside of around 25-27 per cent from the previous closing price, depending on the reference price used.

One of the key factors supporting Jefferies' positive view is Meesho's net merchandise value (NMV), a measure of the value of orders successfully delivered to customers. The company's NMV grew by 23 per cent year-on-year during Q2 FY27. Jefferies noted that growth exceeded 30 per cent when adjusted for the shift in the festive season, suggesting that underlying demand remained strong despite the change in the timing of festive sales.

The brokerage also highlighted an improvement in contribution margin, which reached 6 per cent during the quarter. Better logistics efficiency, faster deliveries, lower returns to origin and increasing delivery density helped support the improvement. These operational gains are important because logistics and delivery costs play a significant role in the economics of a high-volume e-commerce platform.

Jefferies believes Meesho has further opportunities to improve profitability through advertising monetisation, logistics efficiencies and expansion into related business areas. However, the company's immediate priority remains growth and providing value to customers rather than accelerating monetisation at the expense of its customer proposition.

The brokerage expects Meesho's NMV to grow at a compound annual growth rate of around 25 per cent over the coming years. Its outlook assumes that the platform can continue expanding its customer base while gradually improving margins. Nevertheless, its assessment also recognises that the company's future performance will depend on demand conditions and its ability to maintain operating efficiency as the business grows.

While Jefferies remains optimistic, international brokerage Nomura has retained its 'Reduce' rating on Meesho with a target price of Rs 167 per share. This target indicates potential downside of approximately 27 per cent from the previous closing price, based on the brokerage's assessment. The contrasting recommendations highlight the uncertainty surrounding the company's valuation and the pace at which operational improvements may translate into stronger earnings.

Nomura's concerns centre on the difference between improving contribution margins and the company's overall profitability. Although Meesho's contribution margin improved by 140 basis points quarter-on-quarter to 6 per cent, the adjusted EBITDA margin as a proportion of NMV improved by only around 20 basis points to minus 1 per cent. This suggests that gains in the underlying economics of individual transactions are still being offset by other operating investments and expenses.

The brokerage also pointed out that NMV growth of 23 per cent was below its estimate of 31 per cent. Management attributed the difference partly to the shift in the timing of the festive season, which affected the comparison with the previous financial year. Nomura expects some of the improvement in contribution margin to reverse in the December quarter as Meesho continues investing in growth during the festive period. It has largely retained its earnings estimates while maintaining a cautious view of the stock.

The central issue for investors is whether Meesho can maintain strong growth without allowing customer acquisition, technology and operational expenses to rise too quickly. The company has demonstrated that it can reduce its reported losses substantially compared with the previous year, but its latest quarterly figures also show that sustained profitability remains a work in progress.

Domestic brokerage Motilal Oswal Financial Services has retained its 'Buy' rating on Meesho and raised its target price to Rs 265 per share. The brokerage sees potential for further improvement in the company's unit economics as logistics spreads recover and advertising monetisation expands.

Motilal Oswal also highlighted the effect of the festive calendar on quarterly performance. Meesho's NMV grew 23 per cent year-on-year in Q2 FY27, while growth was around 33 per cent when adjusted for the timing of festive sales. The brokerage said festive demand had been stronger than expected, although higher crude oil prices could create supply-chain challenges for sellers.

Its assessment points to the possibility of better margins over the medium term as the platform attracts more users, improves logistics efficiency and increases advertising revenue. However, these expectations depend on continued business growth and the company's ability to manage costs.

The upcoming quarters will be important for Meesho as investors assess whether festive-season demand can sustain the company's growth momentum. The timing of major shopping events can significantly affect quarterly comparisons, making it important to examine both reported figures and festive-adjusted growth.

Meesho's strategy continues to focus on offering affordable products and expanding its customer base. This approach can support order volumes and platform adoption, but the company must also improve its ability to generate earnings from that scale. Logistics efficiency, advertising revenue and a stronger contribution margin could all contribute to better financial performance if the gains are sustained.

At the same time, rising operating expenses, fuel costs, supply-chain pressures and the need for continued investment remain risks. Even with a sharp reduction in year-on-year losses, Meesho has yet to establish consistent profitability, leaving investors to weigh its growth potential against the costs of expansion.

Meesho's Q2 FY27 results present a mixed picture. Revenue growth remained strong and the net loss narrowed considerably compared with the year-ago quarter. Improvements in contribution margin and logistics efficiency have also attracted positive assessments from Jefferies and Motilal Oswal.

Nomura's cautious stance reflects concerns about the sustainability of margin gains and the company's ability to convert business growth into stronger earnings. The difference between the brokerages' target prices illustrates how differently analysts are assessing Meesho's long-term potential and near-term risks.

For investors tracking the stock, the key indicators to watch in the coming quarters will include NMV growth, contribution margin, adjusted EBITDA performance, advertising monetisation and the pace of expense growth. Festive-season demand and the company's ability to maintain operational efficiency will also be important.

The sharp reduction in Meesho's annual loss is an encouraging development, but it does not by itself guarantee sustained profitability or future share-price gains. The company's next results will provide further evidence of whether its growth-first strategy can deliver more durable improvements in financial performance.

This report is for informational purposes only and is not investment advice. Brokerage ratings and target prices represent analysts' views and are not guarantees of future stock performance.