Paytm share price rose 2 per cent on Monday to Rs 799 on BSE after the company reported a consolidated loss of Rs 645.4 crore for the quarter ended June 2022, against a loss of Rs 382 crore logged in the corresponding quarter of the previous fiscal. The digital payments platform’s consolidated revenue for the June FY23 quarter came in at Rs 1,679.6 crore, an 89 per cent growth compared to Rs 891 crore reported in Q1 FY22. The contribution of margins to revenues increased to 43 percent of revenues from 35 percent in the previous quarter i.e. Q4 FY22.
Should you buy, hold or sell Paytm shares?
ICICI Securities: Buy
Target price: Rs 1,285
According to analysts at ICICI Securities, Paytm continues to sequentially improve its margins. Company’s management maintains its guidance of achieving operating profitability (positive EBITDA before ESOP cost) by Q2FY24 driven by ‘better monetisation and moderation in costs’. The brokerage remains conservative and expect the company to be adjusted EBITDA-positive by FY25. It maintains ‘buy’ rating on the stock with an unchanged target price of Rs 1,285 based on the customer lifetime value methodology.
JM Financial: Sell
Target price: Rs 525
Analysts at JM Financial Services maintain bearish outlook on Paytm stock. “We like mgmt’s approach to improve efficiencies and focus on profitability. However, path to sustained improvement is likely to come at slower growth and we continue to see downside risks to current take rates on financial services distribution business,” they said. The analysts stated that they would use recent upmove in the stock price (+27% in last 2 months) as an opportunity to trim. “We believe recent rally is also a function of synchronous global upmove in fintech names (Square, Adyen up over 20%+ in last month or so), they added. JM Financial has ‘sell’ rating on the stock with a target price of Rs 525 per share.
Dolat Capital: Buy
Target price: Rs 1,400
Analysts believe that given the large number of use cases (both on need and want), huge customer base (350mn) and robust tech platform, Paytm can compound its revenues by 17x over a decade and would turn highly profitable and positive on cash generation by FY25. “We thus believe DCF valuation as an ideal tool to value real long term potential of the business,” they said. The research firm expects Paytm to turn PAT break even in FY25 and reach steady state EBIT Margin of 21% over FY30-FY40. Improving Revenue growth, scaling up lending business, revival of Commerce business, rising contribution profitability, and aspiration to achieve break-even for adjusted EBITDA (by Q2FY24) all suggest bettering financial performance, according to Dolat Capital. The firm maintains ‘buy’ rating on Paytm shares with a target price of Rs 1,400.
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