Paytm stock turns ‘attractive’, says Morgan Stanley weeks after cutting target price; sees huge upside

Paytm stock has turned ‘attractive’ for Morgan Stanley after the recent steep fall in the share price and the company’s Q4 business update.

Paytm share price, Paytm stock, Morgan Stanley
Paytm with this partnership becomes the largest consumer platform to enable the creation of ABHA numbers for both Android and iOS users, as per its press statement.

Paytm stock has turned ‘attractive’ for Morgan Stanley after the recent steep fall in the share price and the company’s Q4 business update. Morgan Stanley now sees up to 46% upside in Paytm parent One 97 Communications’ stock, while sticking to its last assigned price target of Rs 935. Earlier, last month, Morgan Stanley had cut target price to Rs 935, and rating to ‘equal weight’, when the Reserve Bank of India (RBI) barred Paytm Payments Bank from onboarding new customers due to supervisory concern.

Paytm share price shot up 3% on Thursday to Rs 657 apiece on BSE, with the stock trading in green for the second consecutive day. Paytm founder and CEO Vijay Shekhar Sharma said this week that the company should achieve operating EBITDA breakeven in the next six quarters, well ahead of estimates by most analysts.

Paytm guided for operating EBITDA break-even in the next six quarters (i.e., by end-September 2023), it is nearing an end of its current investment phase and expects indirect costs to moderate. “We currently project EBITDA break-even in F25 and will revisit our estimates after 4QF22earnings. PAYTM doesn’t expect any impact on its growth trajectory owing to the above,” Morgan Stanley said in a note. Vijay Shekhar Sharma’s address came two weeks after Paytm stocks crashed to an all-time low of Rs 521 against its issue price of Rs 2,150 apiece. Last month, BSE sought clarification from the company, after the share price crashed significantly.

Vijay Shekhar Sharma also said that his stock grants will get vested only when the company’s market cap tops the IPO level on a sustained basis. Paytm stock price has rallied 20 per cent in five days, while it tanked 14.5 per cent in the last one month. The stock is still lower by 59% from the issue price of Rs 2,150 apiece. Last month, Macquarie had cut its price target for the Paytm stock to Rs 450 from the earlier level of Rs 700. The brokerage said that in order to gain scale and size, fintechs need to go beyond distribution and lend for which they need licences.

Meanwhile, One97 has sold 6.5 million loans in Q4FY22, recording a 48% quarter-on-quarter growth with the value of loans disbursed increasing by 63% q-o-q to Rs 3,553 crore. The total merchant payment volume (GMV) processed through the Paytm platform during Q4FY22 aggregated approximately Rs 2.59 trillion, marking a year-on-year growth of 104%.

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First published on: 07-04-2022 at 12:22 IST