Macquarie has given an outperformance call on Paytm and has also raised the target price to Rs 800
Analysts at Macquarie Research have given a double upgrade on One97 Communications, which runs digital payment platform Paytm, after the fintech giant reported operating profitability in the December quarter, three quarters ahead of its earlier guidance of achieving this target by the September 2023 quarter.
Macquarie has upgraded Paytm to ‘outperform’ from ‘underperform’, and has also raised the target price to Rs 800 from Rs 450, which implies a 36 percent upside from the current levels.
“The biggest surprise is distribution business, control of cashbacks, opex,” it said in a note on February 8.
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The research firm further said that Paytm has managed to control overall expenses and charges. “We see a very visible change in the approach of the management to deliver profit,” it said.
Flagging the risks, Macquarie warned about the failure of the BNPL model, competition, and regulatory and corporate governance issues. It further said that the financial services distribution business is the biggest driver of profitability.
Last week, Paytm reported revenue growth of 41 percent to Rs 2,062 crore in the December quarter (Q3), compared to the year-ago period, while net loss narrowed to Rs 392 crore.
Riding the bullish sentiment, Paytm shares hit the upper circuit on February 7 but later closed with over 5 percent gains. Since the listing of Paytm at Rs2,150 in November 2021., the stock is down ~70% as against Nifty being flat.
Goldman Sachs has also raised its target price to Rs 1,150 from Rs 1,120. It has raised FY24 adjusted EBITDA estimate by 30 percent and the FY25 EBITDA estimate by 14 percent.
JP Morgan said the numbers were a ‘surprise’ and it maintained an ‘overweight’ stance in the stock. The broker has a target of Rs 950 on the stock.
