The share price of One 97 Communications, Paytm’s owner, remained volatile on Monday, as the market turned extremely bearish even as brokerages turned positive on the stock, post its Q3 results. Paytm stock closed on a positive note at ₹957.40 on the BSE, up ₹4.15 or 0.44 per cent. The stock, after opening at ₹940, swung between ₹898.95 and ₹984.90 on the BSE.

Goldman Sachs has upgraded the stock to Buy from its earlier neutral call with a price target of ₹1,460. However, it scaled down its price target from ₹1,600 earlier. 

The company on Friday reported a consolidated net loss of ₹776.4 crore for the quarter ended December 31, 2021 — higher than the consolidated net loss of ₹537.8 crore recorded in the same quarter in the previous fiscal and net loss of ₹481.7 crore recorded in September quarter of this fiscal.

However, the firm’s total consolidated income surged to ₹1,533.4 crore (₹867.5 crore). For the three months ended September 30, 2021, total income stood at ₹1,134.5 crore.

The company further said that it had clocked 37 per cent year-on-year growth in average monthly transacting users — the number of unique users with at least one successful payment transaction in a month — at 64.4 million in the quarter.

‘Multiple headwinds’

According to Goldman Sachs, “our analysis suggests the current share price is implying multiple headwinds including MDR caps, a decline in market share for Paytm, and significantly slower ramp-up of Paytm’s financial services, which we view as unlikely.”.

Goldman Sachs said Paytm’s strong topline growth of 89 per cent y-o-y in Q3-FY22 (11 per cent of ahead of its own estimate) will help allay investor concerns around declining payments take rate in recent years.

“In addition, Paytm continues to gain market share across both UPI and non-UPI, and its lending business is seeing robust traction (201 per cent y-o-y revenue growth in Q3). We raise our topline estimates for Paytm by 7-10 per cent and expect growth momentum to sustain; we forecast 89 per cent y-o-y revenue growth in Q4 FY22, with 35 per cent FY22E-25E revenue CAGR,” it added.

‘Sharp improvement in contribution margins’

Morgan Stanely gave the stock an overweight rating at a price target of ₹1,425. According to Morgan Stanley, strong revenue growth led by payments including both non-UPI GMV growth and take rate surprised positively along with sharp improvement in contribution margins q-o-q (31 per cent Vs 24 per cent; MS estimate of 25 per cent) are some of the key positives for the stock.

“We remain constructive on Paytm and see attractive risk-reward. Key downside risks would be: higher-than-expected competitive intensity in payments and/or a reduction in payment charges; an inability to scale up partnerships in financial services; negative regulatory changes in lending business; and a severe third Covid wave,” it said. 

Dolat Capital, the most bullish among the brokerages, maintained a positive view on the stock, stating that it can sustain/accelerate its current growth momentum. It gave the stock a Buy rating with a target price of ₹2,500, 11x FY25E EV/Sales.

BofA Global Research, while retaining its neutral rating with a revised price target of ₹1,125 (reduced by 33 per cent), also tweaked its FY23-24 EPS by 0.9-1.1 per cent. However, though Yes Securities upgraded the stock to reduce from sell, it set a price target of ₹990 (₹1,321).

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