Meesho's Red-Hot Rally: Why Investors Should Delay Buying Despite 18% Surge

The newly-listed shares of Meesho, an e-commerce platform, have been on a tear, surging up to 18 percent on December 18 and extending its bull run since its market debut earlier this month. However, analysts are advising caution and listing out reasons why it may be better for investors to delay purchasing the company's shares.

Meesho's Rapid Ascent

Meesho shares rose to an intraday high of Rs 254.40 apiece on Thursday, the highest level seen by the stock so far. This marks a whopping 129 percent jump from its IPO price of Rs 111 per share. The stock later pared some gains to close around 8 percent higher at Rs 233.53 apiece.

Analysts' Cautious Outlook

Meesho is a strong long-term business, but the current price after the sharp rally makes the near-term risk reward unattractive, according to analysts. The company's growth story is convincing, but buying shares at such elevated levels won't fully account for execution risks and the fact that losses are still present.

Key concerns include:

• Valuation risks: Meesho's fundamentals are improving steadily, but valuation is the key risk.
• Execution risks: The company is still transitioning towards consistent profitability, and sustaining current levels will require tangible progress on unit economics, operating leverage, and competitive intensity management.
• Near-term earnings visibility: Investor confidence is driven more by the perceived long-term opportunity than by near-term earnings visibility.

Investor Focus Shifts to Delivery

For investors, the focus should shift from headline growth to delivery, with questions like how effectively Meesho converts scale into sustainable profitability ultimately determining whether the post-IPO re-rating holds or normalizes over time.

Remember, this is a perspective, not a prediction. It's essential to do your own research and consider multiple viewpoints before making any investment decisions.