Meesho Shares Drop After Widening Losses; Management Hopeful for Improvement

• Meesho's EBITDA and net losses widened significantly in its first quarterly performance post-listing, attributed to lower contribution margins and increased investments.
• Net merchandise value grew 26% year-over-year to ₹10,995 crore, and operating revenue increased 31% to ₹3,517 crore.
• Net loss surged nearly 13 times to ₹491 crore due to rising costs, primarily from higher logistics expenses and growth-related spending.
• Contribution margins declined from 4.4% in Q1FY26 to 2.3% in Q3FY26, but the company expects major adjusted EBITDA margin improvements in the next two quarters.
• Morgan Stanley maintained an 'Equalweight' rating with a ₹174 price target, noting Meesho absorbed higher logistics costs for market expansion, leading to positive surprises in ATU, NMV, and revenue growth.

Why It Matters: Meesho faces widening losses post-IPO but anticipates improved EBITDA margins and growth despite rising costs.