Shares of One 97 Communications (Paytm) were up 3 per cent on Thursday morning but took a U-turn as the session progressed. At last count, the stock was down for the fourth straight session. While several foreign brokerages have price targets that suggest a doubling of the stock price from here, the momentum on Paytm stock is weak, so much so that some technical analysts believe it is headed for a drop towards the Rs 350 level .
Bloomberg reported today that Paytm’s 75 percent return since its IPO is the worst in the world for large IPOs. The stock saw a fresh round of selloff recently after Macquarie said that Jio Financial Services could be a major threat to fintechs like Paytm.
On Thursday, the stock climbed 3.22 per cent to hit an intraday high of Rs 466.90 on the BSE, but erased all the gains. Later it was trading at Rs 449.85, down 0.50 per cent.
In a note to clients on November 22, JM Financial said it expects Paytm revenue to grow at a robust CAGR of 32 per cent in FY2022-26E, largely supported by the financial services business . This is even when it looks at the risk of current take rates. The brokerage has set a target of Rs 600 on Paytm stock.
“While the financial services business is relatively new for Paytm, we see strong growth runway going forward given the large untapped opportunity. Furthermore, we believe the incremental path to profitability will primarily hinge on continued improvement in overall revenue. Dependent, which is linked to reduction in marketing and cash back expenses and ESOP cost for Paytm,” it said.
JP Morgan has a target of Rs 1,100 on the stock with ‘Overweight’ rating. This brokerage sees Paytm’s revenue growing across all its business segments due to device monetization in payments, cross-selling of financial services, ticketing recovery and growing advertising monetization.
“We are looking at growing revenue at a CAGR of over 44 percent to $2.7 billion during FY2012-26 and 48 percent by CM FY2016. We see Paytm achieving the highest revenue and revenue growth among local vertical and global horizontal peers. maintains the level of profit.” Said this.
There is significant room for further expansion as lending penetration is low at 4 per cent of MTU for Paytm postpaid and less than 0.5 per cent for personal loans, while on the merchant side it is 4.4 per cent for instrument merchants, JP Morgan he said . In September, Goldman Sachs suggested a target of Rs 1000 on the stock. In the same month, Citi suggested a target of Rs 998 on the stock.
JM Financial said that payment processing fee has seen a softening in the recent past which has improved profitability, adding that it expects incremental reduction in payment processing fee to be difficult.
“We like the management’s vision to improve efficiency and focus on profitability and expect Paytm EBITDA breakeven by FY26E. Also, we expect adjusted EBITDA breakeven by FY24 as directed by the management.” We forecast GMV and revenue CAGR of 34 per cent and 32 per cent over FY22-26E,” it said.
Ravi Singhal, CEO, GCL Securities, said on Wednesday, “Investors should wait. The stock will take time to reach lower levels. It may test Rs 350 level after some consolidation. Near these levels in the long term.” Accumulation is possible.”
