Shares of Paytm (listed as One97 Communications) are trading 63% lower against their listing price despite the recent four-day rally triggered by better-than-expected earnings for the quarter ended December 2022. The price targets for Paytm by various brokerages and analysts do not signal full recovery to the IPO price due to highly volatile market conditions and weak financial performance since its market debut. In fact, Paytm is among the top loss-making firms on the Dalal Street, which is one of the key factors behind the drag in the stock price since listing.
In the current session, the Paytm stock stood at Rs 712 against the market debut price of Rs 1955 on November 18, 2021, implying a loss of 63.58% during the period.
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Upbeat sentiment after Q3 earnings of the firm has pushed the stock higher by 35% in the last four sessions. In the current trading session, Paytm stock rose up to 5.37 per cent to Rs 714 today against the previous close of Rs 677.60 on BSE.
However, the stock has gained 35.15 per cent in 2023 but fallen 23 per cent in a year. Market cap of Paytm rose to Rs 46,232 crore on BSE.
Total 12.81 lakh shares of the firm changed hands amounting to a turnover of Rs 88.45 crore. The stock hit a 52-week high of Rs 969 on February 10, 2022 and a 52-week low of Rs 439.60 on November 24, 2022 .
In terms of technicals, the relative strength index (RSI) of Paytm stands at 73.4, signaling it’s trading in the overbought territory. The stock has a beta of 0.9, indicating low volatility in a year. Shares of Paytm are trading higher than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages.
In the third quarter of the current fiscal, the payment gateway services provider turned positive at the operating level three quarters ahead of its guidance. It reported EBITDA before ESOP of Rs 31 crore in Q3FY23. The firm also narrowed its Q3 loss to Rs 392 crore for the quarter ended December from Rs 779 crore a year ago. Revenue of the SoftBank-backed firm rose 42% to Rs 2,062 crore in Q3FY23 as against Rs 1,456 crore in Q3FY22.
Macquarie upgraded the Paytm stock to ‘Outperform’ from ‘Underperform’ and raised its target price to Rs 800 from Rs 450.
Subsequently, the stock rose 15% in the previous session.
“Since our last target price cut, Paytm has positively surprised on the distribution of financial services revenue by a wide margin and has also managed to control overall expenses and charges,” it said.
However, it also believes a lot more needs to be done on corporate governance by getting an independent non-executive chairman, more independent members on the board, etc.
Osho Krishan, Sr. Analyst – Technical & Derivative Research, Angel One Ltd said, “Paytm has made its first attempt to test the 200 SMA post the strong surge but failed to surpass the same convincingly. At present, it is hovering near the sloping trend line of the recent two swing highs and until it surpasses the Rs 650-660 zone, timidity is likely to continue in the counter. As far as levels are concerned, Rs 570-550 is likely to provide a cushion to any blip, followed by the strong support of Rs 520. On the higher end, Rs 650-660 is likely to act as immediate resistance, followed by the immediate swing high of Rs 720 levels in a comparable period.”
BofA Securities has a neutral stance on the Paytm stock.
“Paytm reported adjusted EBITDA breakeven 3 quarters ahead of mgmt’s initial guide of Sep’23 target & street expectations. This was mainly on the back of rising mix of high margin lending revenue, improving merchant subscription, reducing payment processing & promotional charges,” said BofA Securities.
After Q3 earnings, Goldman Sachs said, “On the back of 3QFY23 results, we lower our FY23E-25E revenue estimates by up to 3%, due to continued mix shift towards UPI and weaker than expected cloud revenues. However, our EBITDA estimates see a sharp increase on better than 5 February 2023 expected cost control. Our revised 12-month DCF/SOTP based target price is Rs 1,150 (was Rs 1,120; WACC and terminal growth assumptions of 14% and 5% unchanged). We reiterate our Buy rating (on Conviction List) and believe Paytm’s current share price continues to offer a compelling entry point into India’s largest and one of the most profitable fintech platforms.”
The Paytm IPO was open for subscription from November 8 to November 10, 2021. Price band of the share sale was fixed at Rs 2,080-Rs 2,150 per share. The share made its debut at Rs 1,955 on BSE and at Rs 1,950 on NSE, a discount of 9.3% to the issue price. The IPO of the Noida-based firm was subscribed 1.89 times on final day.
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