Several analysts have turned bullish on Paytm’s stock post the first quarter results announcement on Friday, raising their target price up to ₹1,200 per share.
Those who have raised their target price include analysts at Morgan Stanley, Goldman Sachs, Citi, YES Securities, JM Financial and CLSA. Most of them have suggested a ‘Buy’ rating on the stock except Morgan Stanley with ‘Equal weight’ rating.
Paytm on Friday reported a standalone net loss of ₹358 crore, narrower than the net loss of ₹645 crore in the same quarter last fiscal. However the latest net loss was wider than the net loss of ₹168 crore in the March 2023 quarter.
For the quarter under review, EBITDA before ESOP costs grew to ₹84 crore as compared to ₹52 crore in Q4FY23 (excluding UPI incentives). Paytm’s revenue jumped 39 per cent y-o-y to ₹2,342 crore.
Paytm’s contribution profit in Q1 this fiscal stood at ₹1,304 crore, a rise of 80 percent y-o-y while the contribution margin improved to 56 percent from 43 percent a year ago, driven by increase in net payments margin and loan distribution revenues.
Also read: Paytm loan disbursals grew 167% in Q1
However, the Paytm stock closed at ₹ 802 at NSE on Monday, down by little over 5 percent over previous day’s close of ₹844.
Meanwhile, foreign portfolio investors (FPIs) have increased their shareholding to 11.6 per cent to 16.9 per cent in Paytm as of end June 2023, according to shareholding pattern filed by the company with stock exchanges.
What analysts say
Morgan Stanley has raised the target price on Paytm by 11 per cent to ₹830 apiece on higher EBITDA margin estimates, retaining an ‘equal-weight’ rating to the stock.
The analysts at Morgan Stanley added that the Gross Merchandise Value (GMV) growth continues to be driven by good Monthly Transacting Users (MTU) growth, expansion of the registered merchant base, and increased device penetration.
Also read: Shriram Finance, Paytm to announce ‘strategic alliance’
Analysts at Citi have raised the target price to ₹1,200 with a ‘Buy’ rating on the stock. It says that the net payment margin is on upswing and ahead of estimates aided by lower interchange expenses.
Similarly, Goldman Sachs has increased target price on the company’s stock to ₹1,200 as analysts see Paytm as not only the fastest growing company within India, but also the most profitable. Growth trajectory in payments device impresses the analysts as it expects FY25 to be first full year of positive net income
CLSA has raised the 12-month target price to ₹1,050 with a ‘Buy’ rating on the stock. BofA expects the stock price to run up nearly 21 per cent to ₹1,020 as it sees Paytm’s growth trajectory intact. It maintained a ‘Buy’ rating on the company’s stock price.
Also read: Paytm brings UPI SDK in India for faster payments
Furthermore, analysts at Motilal Oswal Financial Services see 19 per cent potential rally in the Paytm stock price to ₹1,000 apiece. The brokerage firm has maintained its ‘Buy’ as it continues to believe that Paytm will achieve earnings breakeven in FY25. The management iterated that the fintech pioneer remains focused on becoming free cash flow positive before the end of FY24. “Paytm reported a largely in-line Q1FY24 with sustained momentum in GMV and robust growth in disbursements. We believe that consistent improvement in contribution margin and operating leverage will continue to drive operating profitability,” it added.
YES Securities has upgraded Paytm’s rating to ‘add’ from ‘neutral’ earlier, and revised the target price upwards to ₹950 apiece.
Paytm’s management had guided that the company would achieve 7-9 bps Net Payments Margin including UPI incentive but it achieved the same without UPI incentive. The improvement in Net Payments Margin was driven by, among other factors, traction for higher-margin Payment products such as EMI and card transactions, it said.
JM Financial has also upgraded the target price to ₹1,060 from ₹855 while maintaining a ‘Buy’ rating on the company’s stock.