Paytm shares reached the upper circuit for the second consecutive session; can they reach Rs 650?

Paytm shares: For the second consecutive session on Thursday, shares of Paytm (listed as One97 Communications) surged to the upper circuit of 5%, even as the broader market experienced a correction. At 10:07 am, the stock rose by 4.99% to reach Rs 401.55 on the BSE. Over the past year, it has witnessed a decline of 46.17%, and in 2024 alone, it has fallen by 41.59%. The stock saw a 5% upper circuit on Wednesday following a report suggesting that Gautam Adani, chairman of the Adani Group, was contemplating acquiring a stake in Paytm’s parent company, One97 Communications. However, Paytm later issued a clarification stating that the report was mere speculation.

In the ongoing session, the Paytm stock surged by 5% to reach Rs 377.50 on the BSE, resulting in the firm’s market capitalization rising to Rs 24,001 crore. A total of 1.61 lakh shares of the company were traded, amounting to a turnover of Rs 6.06 crore.

On May 9, 2024, the stock hit a 52-week low of Rs 310, while it reached its 52-week high of Rs 998.30 on October 20, 2023.

With a beta of 0.2, indicating low volatility over the year, Paytm’s relative strength index (RSI) stands at 50.2, suggesting that it is neither oversold nor overbought. The stock is currently trading above the 5-day, 10-day, 20-day, 30-day, and 50-day moving averages, but below the 100-day, 150-day, and 200-day moving averages from a technical standpoint.

Dolat Capital anticipates the stock to achieve a target of Rs 650, indicating a potential upside of over 70% within a year.

Paytm’s renewed focus on business expansion and cost efficiency signifies a positive trajectory for its revival. While we have adjusted our revenue estimates for FY25/FY26E downwards by 8%/7%, and foresee a delay in achieving profitability targets, we believe that the current market price does not adequately account for the potential for a more robust recovery from Q2 onwards. Hence, we maintain a ‘Buy’ rating, with a price target of Rs 650 based on Discounted Cash Flow (DCF) analysis (representing 2.4x FY26E EV/Sales),” stated Dolat Capital.

YES Securities has revised its price objective for Paytm to Rs 450, putting the company at 2.8 times its FY26 price-to-sales ratio.

After facing pressure, the merchant payments business has shown signs of growth in April and May. Conversely, monthly transacting users, crucial for the consumer payments business, have declined by 25% compared to January. April witnessed the steepest decline in MTUs, but this trend stabilized in May. Growth in MTUs is anticipated post the commencement of TPAP, commented the brokerage.

In the previous fiscal’s Q4, the consolidated net loss of Paytm widened to Rs 549.60 crore compared to Rs 219.80 crore in the December quarter and Rs 168.90 crore in the same quarter of the previous year. -Paytm shares

Revenue from operations decreased by 3 percent year-on-year to Rs 2,267.10 crore, down from Rs 2,334.50 crore in the corresponding quarter of the previous year.

Also Read: Tata Steel shares

Paytm attributed its March quarter results to a temporary disruption due to the transition to UPI and a permanent disruption caused by the embargo on Paytm Payments Bank Ltd (PPBL). Additionally, Paytm has recognized an impairment loss on the carrying value of the company’s investment in PPBL.