Meesho stock plunges 10% on profit-booking, erases 2-day gains of ₹65 from recent high

Meesho’s share price plunged nearly 10% to the lower circuit at ₹201.68, erasing a significant portion of its recent gains. This sharp drop follows two days of aggressive selling, wiping out the upwards momentum that had previously pushed the stock to a high of ₹254.65. The recent volatility signals profit-taking by investors after a strong rally, highlighting the dynamic and often unpredictable nature of newly listed stocks.

Despite this correction, Meesho's shares still stand around 82% above their initial public offering (IPO) price of ₹111. The IPO itself was highly successful, subscribed 79 times, and debuted with a 46% premium, generating over ₹5,000 crore. However, market analysts now point to several factors dampening investor enthusiasm, including the stock's low free-float, which tends to exaggerate price movements.

Experts suggest that the initial optimism surrounding Meesho might have outpaced its underlying fundamentals. While Meesho boasts a convincing growth story and a unique social commerce model, concerns persist about its path to consistent profitability amid rising funding costs and intense competition in the e-commerce sector. Investors are now shifting their focus from top-line growth to the company’s ability to achieve unit economics and operational efficiency.

The current valuation, around 40x EV/EBITDA, is seen as expensive compared to its peers, making the stock susceptible to corrections. A significant event to watch will be the lock-in period for nearly 11 crore shares ending on January 7th, which could further increase supply and influence the stock price. This period of market adjustment underscores the need for Meesho to demonstrate tangible progress in its journey toward sustained earnings in the competitive Indian e-commerce landscape.