Paytm shares hit 52-week high; stock up 93% from one-year low. what's next?

Shares of One 97 Communications (Paytm) rose nearly 2 per cent to hit a 52-week high in Wednesday's trade. With this stock has risen 93 per cent from its 52-week low of 439.60 hit in November last year. The stock has been rising on improving business prospects and recent 'buy' ratings by a host of brokerages with price targets around Rs 850 level.

This past week,  Paytm said it continued to expand its consumer base in May and that it made disbursements of Rs 5,502 crore for the month through Paytm platform. Paytm said 75 lakh merchants are now paying subscription for its payment devices, up 4 lakh in May, adding that its average monthly transacting users (MTU) rose 24 per cent YoY at 9.2 crore for quarter-to-date (average for April and May). Merchant Payment volumes (GMV) for quarter to date stood at Rs 2.65 lakh cr or $32.1 billion, up 35 per cent YoY.

CLSA on June 8 suggested a 'Buy' rating on the stock with a target of Rs 850.

"We use a long-term discounted earnings model to arrive at our target price. We

factor in a risk-free rate of 7.25 per cent, beta of 1.25 times and risk-premium of 5.5 per cent. Our terminal growth rate assumption is 5 per cent, CLSA said.

On June 7, BofA Securities upgraded Paytm to 'Buy' with a target of Rs 855 from Rs 780 earlier. BofA said that Paytm possesses potential for positive operational leverage and sits in a 'sweet spot' due to limited competition. It also highlighted other positive factors such as the growth of digitalisation driving payments and the company's robust cash balance.

The company reported 51 per cent jump in revenue from operations at Rs 2,334 crore for the March quarter hiwle it brought down its net loss in the fourth quarter to Rs 168 crore from Rs 761 crore a year ago, and Rs 392 crore in December quarter.

The stock rose 1.64 per cent to hit a high of Rs 846.70 on BSE.

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