Trent shares down 35% from peak: Should you buy the dip in this Tata stock?

Economic Times

2 days ago

The Tata Group's retail crown jewel is facing its biggest growth reality check in years. Trent, which operates the popular Zudio and Westside chains, has seen its shares crash 35% from their peak amid growing concerns over its ability to sustain the blistering 35% CAGR revenue growth delivered over the past five years.
ADVERTISEMENT Friday's brutal 12% single-day plunge followed a sharp slowdown in the company's standalone revenue growth in Q1, which fell to just 20% — a stark deceleration that has shaken investor confidence in what was once seen as an unstoppable retail juggernaut.
The growth slowdown has triggered a painful reassessment of Trent's valuation and outlook. At its AGM, the company disappointed on near-term growth expectations in its core fashion business, which is projected to deliver around 20% growth in Q1FY26E, well below its FY20–25 CAGR of 35%. While management reaffirmed their aspiration of 25%-plus growth in the coming years, the current run rate falls significantly short of that target.
The deceleration has triggered immediate analyst downgrades, with Nuvama leading the charge by cutting the stock to 'HOLD' from a previously higher rating. 'Adjusting for the current run rate, we are cutting FY26E/27E revenue by -5%/-6% and EBITDA by -9%/-12%,' Nuvama analysts wrote, slashing their target price to Rs 5,884 from Rs 6,627.The brokerage's assessment was blunt: 'Underwhelming near-term growth prompts the downgrade to 'HOLD' as the current valuation is too demanding.'
Also Read | Trent shares slide as Nuvama downgrades on slower growth outlook flagged at AGM
ADVERTISEMENT HSBC, while maintaining a 'Buy' rating, trimmed its target price for Trent to Rs 6,600 from Rs 6,700, citing weaker-than-expected Q1 performance. The global brokerage noted that at the AGM, Trent's chairman indicated Q1 revenues exceeded Rs 50 billion, growing over 20% year-on-year, well below the 34% growth projected by Bloomberg consensus and HSBC.'The soft demand environment and sourcing issues might have impacted this below-consensus result,' HSBC analysts said, pointing to supply chain disruptions from Bangladesh, which remains part of Trent's sourcing mix, despite over 90% of its products being made in India.
ADVERTISEMENT This growth deceleration comes at a crucial time for Trent, once considered one of India's most compelling retail success stories. The company's rapid expansion of its value fashion chain Zudio had aggressively captured market share, while Westside maintained steady growth in the premium segment.Nuvama highlighted the near-term challenges: 'Pickup in Zudio Beauty and the Star business can become the next big growth levers, but we believe these businesses need to stabilise before scaling up. Slowdown in growth forces our hand to downgrade Trent to 'HOLD'.'
ADVERTISEMENT On the technical front, the picture has turned decidedly bearish. Anand James, Chief Market Strategist at Geojit Financial Services, noted the severity of Friday's decline: 'A gap-down opening on Friday, followed by extended slippage through the day, underscores the strength of bearish momentum. But the fact that we've now swung to two standard deviations from a five-month top in a single day potentially sets the stage for a pullback in the coming week.'James identified support near Rs 5,111, cautioning that further technical weakness could emerge.Meanwhile, Rajesh Palviya offered a more constructive view for long-term investors, identifying key support zones around Rs 5,000–4,800. 'Looking at the intensity of selling pressure in today's session, we may see further downside towards Rs 5,200–5,100. But Rs 5,000 could act as a strong support area,' he said.
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For those looking to buy the dip, Palviya recommended patience: 'Investors should wait for another 100–200 point correction. Once that plays out, one can look to accumulate, as the long-term structure remains bullish.'However, he cautioned about continued volatility: 'We may see some consolidation or range-bound action between Rs 5,000 and Rs 6,000 for the next couple of months, unless we see clear revival signs from the management.' His advised strategy: 'Buy on dips. Place a stop loss at around Rs 4,850 if entering during the correction.'The key question for investors now is whether Trent's growth slowdown is a temporary blip or a structural shift in India's retail landscape. With the stock's lofty valuation built on expectations of sustained high growth, the current deceleration has exposed the risks of paying premium multiples for growth.HSBC remains optimistic about the long-term outlook, noting the company's ambitious 25–30% CAGR growth target over the next five years. However, it also flagged the need for 'a stable macro environment and availability of good quality store locations' as essential to sustaining that growth.
As Trent navigates this period of heightened scrutiny, investors will closely watch for signs of growth stabilisation and management's ability to execute on new levers like Zudio Beauty and the Star business. The stock's 35% decline from its peak may make valuations more attractive — but the growth trajectory remains the decisive factor in determining whether this is a buying opportunity or a fundamental shift in the company's prospects.
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