Financial analysts have initiated coverage on Meesho with a target price of ₹170.00 and a 'Reduce' rating, positioning the e-commerce giant at the center of investment discussions. The target price represents a modest upside from the current market price of ₹166.90, reflecting cautious optimism about the company's prospects.

Company Profile and Market Position

Founded in 2015, Meesho has established itself as India's largest e-commerce player by order volumes and annual transacting users. The company operates a distinctive value-focused e-commerce marketplace that connects multiple stakeholders including consumers, sellers, logistics partners and content creators.

Business Model and Revenue Strategy

Meesho differentiates itself through a commission-free approach, choosing not to charge sellers the traditional commission fees that characterize most e-commerce platforms. Instead, the company monetizes its platform through three primary revenue streams: fulfillment services, advertising solutions, and data insights.

The introduction of Valmo has further enhanced Meesho's value proposition by reducing costs charged to sellers. This strategic move has opened up e-commerce categories that were previously considered unserviceable due to cost constraints.

Technology and User Experience

The platform leverages hyper-personalized, discovery-led shopping journeys that mirror offline market shopping patterns. This approach facilitates a seamless transition for new-to-e-commerce shoppers, particularly important in India's diverse retail landscape.

Valuation and Risk Assessment

The DCF-based valuation methodology results in target price implications of 108x and 25x EV/Adjusted EBITDA multiples for FY28 and FY30 respectively. These multiples align with the company's long-term growth potential in the Indian e-commerce sector.

Risk Factors

Downside risks include:

• Plateauing logistics costs that could limit growth potential
• Increased competitive intensity in the e-commerce space
• Limited advertising-based monetization capabilities

Upside opportunities encompass:

• Monetization through content and financing services
• Better than expected growth trajectory
• Revenue ramp-up through commission structures via Meesho Mall

Market Outlook

Analysts expect Meesho to maintain its position as a leading force in Indian e-commerce, particularly as the primary digital commerce platform for a significant portion of the Indian population. The company's focus on serving new-to-e-commerce users positions it strategically for India's ongoing digital transformation.

BofA Securities initiated coverage on newly listed e-commerce firm Meesho on Monday with a Neutral rating and a price target of ₹190.00 per share. The brokerage identified emerging monetisation drivers in advertising and logistics while maintaining a measured stance on valuation following the stock's significant post-IPO performance. Meesho shares fell 5% on Monday to ₹162.10, following a 3% rise on Friday after three consecutive sessions of decline.

Key Monetisation Drivers Identified

BofA highlighted two primary areas driving Meesho's monetisation strategy. The brokerage flagged advertising as a crucial revenue driver, noting the company's strategic shift from a cost-per-click (CPC) model to a return-on-investment-based approach.

According to BofA's analysis, sellers faced significant challenges under the CPC model as the average seller in India didn't fully understand the CPC product, and ad spending didn't lead to conversions. The new ROI-based approach is preferred by merchants as it delivers more outcome-driven results. The brokerage noted that Meesho's advertising engine follows the GMVmax model used by platforms such as TikTok Shop and Shopee.

Logistics Strategy Focuses on Cost Efficiency

Logistics emerged as the second key monetisation driver in BofA's assessment. The brokerage emphasised Meesho's ability to serve value-focused users efficiently through continued efforts to reduce logistics costs. The company prioritises keeping logistics costs low for sellers rather than extracting profits from its logistics network, enabling sellers to offer a wider range of affordable products.

Stock Performance Since Market Debut

Despite Monday's decline, Meesho shares continue trading well above their IPO price. The stock performance since listing shows significant volatility following initial market enthusiasm.

Meesho made its stock market debut on December 10, listing at ₹162.00, representing a 46% premium to the IPO price, and closed the first trading session near ₹170.00, marking a 53% gain. The company's IPO, valued at over ₹5,000 crores, was subscribed 79 times overall, with retail investors alone bidding 19 times the shares on offer.

Market Transition from Listing Enthusiasm

BofA's coverage initiation marks a shift in market focus from listing-driven momentum to fundamental analysis of the company's operating performance and business model sustainability. The Neutral rating and ₹190.00 price target reflect a balanced assessment of the stock's risk-reward profile at current levels. While the brokerage acknowledged structural drivers in advertising and logistics, the measured rating indicates caution as investors recalibrate expectations following the initial market enthusiasm surrounding one of the most closely watched recent listings.