Analysts said One 97 Communications, the operator of mobile payment platform Paytm, has issued upbeat guidance saying it remains focused on its path to attaining operating profitability and generating free cash flows (net of capital expenditure) in the next 12-18 months. This prompted a handful of brokerages to give ‘buy’ recommendations on Friday, resulting in the stock soaring as much as 8% earlier on Friday. shares ended 7% higher at ₹536.90.
Analysts at
upgraded the stock to ‘buy’ with a price target of ₹600 – implying an 11% up move from the current levels.
“While we have remained cautious on Paytm’s business model since our initiation,” said JM Financial in a note to clients. “…its operating metrics are gradually improving with management’s focus on increasing efficiencies and profitability, which in turn should aid Paytm achieve EBITDA breakeven by FY26E, in our view.”
“Further, Paytm’s stock price has corrected by 77% since its IPO (last year) which has made risk reward favourable for Paytm,” it said.
ET Bureau
US investment bank Morgan Stanley maintained its ‘equal weight’ rating on the stock with a target price of ₹695, while CLSA maintained its buy rating and a target price of ₹650 – meaning a 21-29% upside from here.
Paytm has led the rout in shares of India’s new-age businesses last month as investors, predominantly institutional, are dumping their holdings, raising concerns how much more would these stocks fall. It touched an all-time low of ₹439.60 on November 24 but has recovered almost 25% since then.
“On profitability, it expects to become free cash flow positive in the next 12-18 months, which is in line with our view of cash burn ending in the next 4-6 quarters,” said CLSA in a client note. “The company believes its net payment margin will not be impacted materially even if there is a reduction in MDR rates.”
also maintained a buy rating with a price target of ₹1,285 – 1.4 times the current price.
Early last week, brokerage firm Macquarie sounded warning bells for Indian fintechs and non-bank lenders such as Paytm and Bajaj FinServ from the entry of Jio Financial Services.
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ET Bureau