Paytm shares rally 9% today to hit 52-week high; here's why | Bernstein target price

Paytm share price: One 97 Communications Ltd, the parent company of fintech platform Paytm, jumped nearly 9 per cent during the trading session on Monday after overseas brokerage firm Bernstein raised its target price above the IPO issue price for the first time since the company's listing five years ago.

Shares of Paytm jumped 8.87 per cent on Monday to Rs 1,568.75, hitting a 52-week high. The company commanded a market capitalisation of more than Rs 1 lakh crore. The stock has gained 66 per cent from its 52-week low of Rs 947.10, hit on March 30. The stock is up 40 per cent in the last one year, while it has gained 17 per cent in the last one month.

Bernstein has maintained its 'outperform' rating on the stock, with a revised target price of Rs 2,200, up from Rs 1,500 apiece earlier. To recall, this is the first time the brokerage has set a target price above Paytm's IPO price of Rs 2,150. Bernstein's target price suggests a 53 per cent upside potential from the stock's previous close.

Investors may recall that Paytm was listed on the bourses in November 2021, when the company raised a total of Rs 18,300 crore through its IPO, with a price band of Rs 2,080-2,150 and a lot size of six equity shares. The stock tumbled to below the Rs 300 level in February 2024.

"We are incorporating the merchant discount rate (MDR) introduction on UPI transactions into our base case from FY28E onwards. We think MDR could lift net payments margins by 3-4 bps, driving a 30 per cent increase in FY30E EPS," said Bernstein in its fresh report. To recall, MDR on UPI transactions could be introduced following recent commentary from the Ministry of Finance.

Recently, legislative changes removed the statutory prohibition on charging MDR on UPI transactions, suggesting that the debate has shifted from whether MDR will return to when and in what form. "As a result, we move UPI monetisation from the optionality bucket into our base-case forecasts and phase in its benefits from FY28E onwards," it said.

Given the highly skewed nature of UPI transaction values, even a narrow charging perimeter can capture a meaningful share of payment value. We estimate MDR will apply to 50 per cent of transaction value and that Paytm can realise 3-4 bps of incremental net payments margin, translating into Rs 2,200 crore of incremental EBITDA by FY30E, Bernstein added.

From a technical perspective, Paytm was also among the top picks of Axis Direct. Paytm delivered a decisive breakout above the rounded-bottom pattern on the weekly chart, backed by a strong bullish candle, signalling the onset of a medium-term uptrend. Price action continues to form a higher high–higher low pattern, reinforcing the prevailing positive trend and indicating sustained buying interest, it said.

"The weekly RSI is holding above its reference line, generating a buy signal and an improving trend structure. Additionally, the weekly RSI has broken above its downward-sloping trendline near the 60 mark, reinforcing the positive bias, strengthening bullish momentum, and confirming the validity of the price breakout," Axis added, with a target price of Rs 1,535-1,585 and a stop loss of Rs 1,343.