Nykaa shares: Why Abhishek Basumallick is not bullish on the stock; brokerages see up to 40% uspide?

FSN E-Commerce Ventures (Nykaa) has been hogging the spotlight at Dalal Street for quite a while. As the 'buy' calls get louder for the new-age internet player, some of the seasoned minds of Dalal Street have a word of caution for the investors. They continue to remain alert when it comes to Nykaa but see better opportunities in other companies from the internet space. A host of brokerage firms believe that Nykaa that sustained moats in the beauty and personal care segment (BPC), expansion in other segments and robust industry tailwinds and plans to focus on niche markets is likely to give Nykaa a push in the coming days. However, some of the investors believe that the company is facing a stiff competition and the stock has been rallying only after a steep correction. After the markets have bottomed-out, there is some amount of buying interest coming in for new age companies including Nykaa. The stock has corrected sharply and people believe that the worst is over for the company and things will improve from here, said Abhishek Basumallick, Founder of Intelsense Capital. Basumallick said that he is not comfortable with the business model of the company, citing the stiff competition in the industry. "Too many D2C and large brands eye the same set of customers," he said and added that other new age companies have differentiated offerings. However, brokerage firms continue to remain positive on the stock. The trio of Kotak Institutional Equities, Elara Capital and JM Financial has a buy rating on the stock with a target price of Rs 210, suggesting an upside of 40 per cent from its close at Rs 150 on Friday. Among other domestic brokerage firms, Nuvama Institutional Equities has a 'neutral' rating on the stock with a target price of Rs 186. Stable growth in BPC, along with profitability improvement, is admirable. Going forward, comfort on competition and cash flow generation, as per us, can drive re-rating, it said. Meanwhile, Nomura sees Nykaa at Rs 183, while Macquarie pegs its value at Rs 115. The stock has received a 'Buy' rating from Jefferies with a base target of Rs 200. The foreign brokerage sees the stock testing Rs 260 level in its upside scenario and a share price as low as Rs 100 in its downside scenario.