Paytm achieved profitability three quarters ahead of its guidance, causing the market sentiment regarding the payment aggregator and financial services firm to turn positive, and sending the share price soaring. The company reported a revenue of Rs 2,062 crore in Q3FY23, up 42% on-year, while the firm’s contribution profit was up 131% on-year at Rs 1,048 crore. The stock has seen a rise of 28% from Friday’s closing price, regaining the interest of traders and investors.
Paytm Stock Calls
BoFa Securities: Neutral
Target Price: Rs 730
CMP: Rs 524.95
Upside: 39%
BoFa Securities maintains a ‘neutral’ recommendation on Paytm. The brokerage is optimistic on fundamentals and sees room for Paytm to scale up aggressively without taking any balance sheet risks. “While Paytm has key differentiating factors versus peers, overall given higher competition & additional regulatory risks, we expect slower path to monetization leading to delayed EBITDA breakeven. In our view, the lending business provides an upside optionality to Paytm giving Paytm room to scale up subject to execution”, said the company.
Goldman Sachs: Buy
Target Price: Rs 1,150
CMP: Rs 524.9
Upside: 119.1%
Goldman Sachs raised its FY24/FY25 adjusted EBITDA estimates for Paytm by 30%/14% on the back of Q3FY23 results. The journey to profitability was one quarter ahead of their recently upgraded expectation. The brokerage also said they expect the profits to sustain and with strong traction in disbursals, operating leverage, and UPI reimbursement, they expect the EBITDA margin to expand. This, to Goldman Sachs, is a significant catalyst for the stock.
The current stock price, according to the company’s analysis, suggests Paytm’s current share price is already pricing in multiple headwinds, with the stock trading close to its bear-case implied value; we see risk-reward as skewed to the upside. Paytm’s valuation multiples are at a discount to global/India peers, said Goldman Sachs.
Macquarie Research: Outperform
Target Price: Rs 800
CMP: Rs 588
Upside: 36.1%
Macquarie Research double-upgraded the digital financial services firm from underperform to outperform as the quarter ending December’s results surprised the markets by a wide margin. “At the time of listing, profit and free cash flow were not even a part of management’s discussion. However, we see a very visible change in approach of management to deliver profit, evidenced, we believe, by the core EBITDA profitability that was reported recently,” said the research firm.
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