Shares of One 97 Communications (Paytm) rose 3 per cent on Thursday morning, only to take a U-turn as the session progressed. At last count, the scrip was down for the fourth straight session. While a host of foreign brokerages have price targets that suggests up to doubling of the stock price from here on, the momentum on the Paytm stock is weak, so much so that some technical analysts see it falling to sub-Rs 350 level.
Paytm's 75 per cent since IPO is worlds worst for large IPOs in a decade, Bloomberg reported today. The stock saw a fresh bout of selling recently after Macquarie said Jio Financial Services could be formidable threat to fintechs like Paytm.
On Thursday, the scrip rose 3.22 per cent to hit high of Rs 466.90 on BSE, before erasing entire gains. It was later traded at Rs 449.85, down 0.50 per cent.
In a note to clients on November 22, JM Financial said it expects Paytm revenue to grow at a strong CAGR of 32 per cent over FY22-26E, primarily aided by scale in financial services business. This is even as it sees risks to the current take rates. The brokerage has a target of Rs 600 on Paytm stock.
"While financial services business for Paytm is relatively new, we see strong growth runway going ahead given the large untapped opportunity. Further, we believe incremental path to profitability remains primarily contingent on continued improvement in overall revenue, coupled with reduction in marketing and cash back spends and ESOP costs for Paytm," it said.
JPMorgan has a target of Rs 1,100 on the stock, with an 'Overweight' rating. This brokerage also sees Paytm's revenue growing across all its business segments, thanks to device monetisation in payments, financial services cross-selling, ticketing recovery and rising ad monetisation.
"We see revenues growing at a over 44 per cent CAGR over FY22-26, to $2.7 billion, and CMs rising to 48 per cent by FY26. We see Paytm retaining the highest revenue and profit levels among local vertical and global horizontal peers," it said.
There is significant room ahead for expansion as the penetration in lending remains low at 4 per cent of MTU for Paytm Postpaid and an even lower 0.5 per cent for personal loans while on the merchant side it is 4.4 per cent for devices merchants, JP Morgan added. In September, Goldman Sachs suggested a target of Rs 1000 on the stock. The same month Citi suggested a target of Rs 998 on the stock.
JM Financial said while payment processing charges have seen moderation in recent times leading to improvement in profitability, it expects incremental reduction on payment processing charges is difficult.
"We like management’s approach to improve efficiencies and focus on profitability and expect Paytm Ebitda breakeven by FY26E. Simultaneously, we expect djusted Ebitda breakeven by FY24, as guided by the management. We forecast GMV and revenue CAGR of 34 per cent and 32 per cent over FY22-26E," it said.
Ravi Singal, CEO of GCL Securities on Wednesday said: "Investors must wait. The stock will take time to reach the bottom. It can test Rs 350 levels after some consolidation. It is possible to accumulate near these levels in the long term."
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