Shares of online retailer Meesho Ltd. saw a significant jump of over 6% on Tuesday, reaching Rs 240.40 on the BSE. This surge followed a bullish outlook from global investment bank Jefferies, which assigned a price target of Rs 240, indicating a potential 10% upside from its previous close.
Jefferies Projects Sustained Growth for Meesho
Jefferies' optimistic assessment is rooted in Meesho's projected ability to maintain robust growth over the next five years. Management targets an impressive 25% annual increase in Net Merchandise Value (NMV). This expansion is expected to be fueled by approximately 15% yearly growth in transacting users and a similar rise in order frequency, even with an anticipated 5% decline in average order value (AOV).
Differentiated Offering and Expanding Reach
A key factor underpinning Meesho's strong engagement is its competitive pricing strategy, with products typically 20% below those of horizontal peers. This is supported by a highly fragmented seller ecosystem and a streamlined onboarding process. Notably, nearly 70% of its 140 million listed products are unique, fostering differentiation and attracting value-conscious consumers.
Meesho Mall is also emerging as a significant growth driver, reporting over 90% year-on-year growth. This platform is gaining traction in higher-value categories, demonstrating Meesho's cost advantage across both value and premium product segments.
Path to Profitability and Operational Efficiencies
The investment bank anticipates meaningful improvements in profitability. The contribution margin (CM), currently around 4.6%, is projected to increase to approximately 5.5% over the next 12 months and reach 8.5% by fiscal year 2031. This enhancement is expected to come from better logistics margins, increased advertising monetization, and operating leverage. Meesho's management, however, remains focused on driving platform growth rather than aggressive seller monetization, emphasizing the significant room for market penetration. The company aims to become cash-flow positive within the next few quarters, followed by achieving EBITDA break-even.
Logistics remains a core competitive advantage. Valmo, Meesho's logistics arm, has built one of India’s largest logistics networks in just three years. Future plans include reducing logistics costs through greater automation, higher prepaid-order penetration, and self-pickup initiatives, further supporting profitability and competitive pricing.
Innovation and Future Monetization
Meesho is increasingly integrating artificial intelligence into its platform to enhance personalized product discovery, recommendation systems, and voice-enabled commerce. Beyond its core marketplace, the company identifies financial services, such as Buy Now, Pay Later (BNPL) offerings for customers, as a potential long-term monetization opportunity. Leveraging proprietary data could also significantly improve credit underwriting capabilities.
Jefferies views the competitive landscape as manageable. While major players like Amazon and Flipkart prioritize speed and convenience, Meesho maintains its distinct focus on delivering value to both consumers and sellers. This differentiated positioning, combined with continued user and order growth, improving unit economics, and emerging monetization opportunities, is expected to support Meesho’s long-term expansion and profitability.