• Tue. Feb 27th, 2024

Paytm shares have gained 38 percent in the last six months; Is it still a buy?

Paytm shares have gained 38 percent in the last six months;  Is it still a buy?

A 97 Communications ( Paytm ) shares have been on a bull run for the past six months. The stock has gained 38 percent over the past six months, though it’s still far from its 52-week high. 844.40 reached on August 8, 2022. On a monthly basis, the stock has been in the green since December 2022.

A 97 Communications ( Paytm ) shares have been on a bull run for the past six months. The stock has gained 38 percent over the past six months, though it’s still far from its 52-week high. 844.40 reached on August 8, 2022. On a monthly basis, the stock has been in the green since December 2022.

Shares of Paytm fell 0.60 percent 709.75 on BSE on Tuesday (May 6) after falling half a percent in the previous session even as the company reported business updates for the month of May.

Shares of Paytm fell 0.60 percent 709.75 on BSE on Tuesday (May 6) after falling half a percent in the previous session even as the company reported business updates for the month of May.

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Analysts and brokerage firms are positive about the company’s long-term prospects as its May business updates and earnings for the January-March quarter beat expectations.

In a BSE filing on Monday (June 5), Paytm continued to witness expansion in its customer base with average monthly transaction users (MTU) during the quarter (averaged over April-May 2023), from 24 to 9.2 crore. Percentage Year-on-Year (YoY).

“We continue to see growth in the distribution of postpaid and personal loans. We are partnering with large NBFCs and banks and we continue to focus on the quality of loans disbursed through our platform. We currently have seven lending partners and we aim to onboard three. Four partners by FY24 ,” Paytm said.

Paytm’s consolidated net loss narrows sharply 168.4 crore in the fourth quarter of FY23 It was Rs 761.4 crore in the fourth quarter of the previous year. Performance was aided by increased GMV, higher merchant subscription revenue, growth in disbursed loans and full-year UPI incentives reported in the quarter.

Income from operations has ceased 2,334.5 crore in the fourth quarter, registering a growth of 51.5 percent. 1,540.9 crore in the fourth quarter, an increase of 13.2 percent 2,062.2 crores.

After a business update on June 5, the brokerage firm Motilal Oswal Financial Services Paytm stock with a target price of BUY has been given 900 as the brokerage firm expects a 26 percent upside potential in Paytm shares.

Highlighting the company’s May 2023 monthly business update, Paytm’s total number of loans grew 54 per cent year-on-year (YoY) to 8.5 million in April-May 2022 from 5.5 million in April-May 2022, Motilal Oswal said. The value of disbursed loans increased by 169 percent year-on-year 96.2 billion in April-May 2023 55.5 billion in Q1FY23.

“The average ticket size is also witnessing a steady increase due to the scale-up of post-paid and personal loans. It is almost 11,300 per loan in May 2023. After a drag in April 2023, merchant loans also improved in May 2023 due to a technology system upgrade by one of the leading distribution partners. It has seven lending partners and aims to onboard three to four partners in FY24,” said Motilal Oswal.

In a report on June 2, the global brokerage firm CLSA Paytm highlights that it has scaled up its loan disbursement from almost scratch to quarterly run rate disbursement levels 120 billion in the last eight quarters. BNPL’s (Buy Now Pay Later) share in total distribution has been around 55 per cent in the last few quarters.

CLSA underlines that BNPL is a high-volume but low-margin product for Paytm and a funnel to acquire personal loan customers. The other two products – personal loans and merchant loans – are lower volume but higher margin.

The brokerage firm has a buy call with a target price on the stock 850.

“We use a long-term discounted income model to arrive at our target price. We consider a risk-free rate of 7.25 percent, a beta of 1.25 times and a risk premium of 5.5 percent. Our terminal growth rate assumption is 5 percent,” CLSA said.

“These include asset quality issues in the loan disbursement business, migration of BNPL customers to credit cards in the medium term and price wars in the soundbox segment,” CLSA said.

Some technical analysts believe that the stock may see profit booking in the near term due to its sharp gains in the last six months.

Jigar S. Patel, Senior Manager, Equity Research Anand Rathi Share and Stock Brokers The counter rose 62 percent from its 52-week low 439.60 on 24 November 2022.

“At the current stage, it made a triple top near the resistance level 710 daily RSI with negative divergence signal for temporary pause or correction. One needs to avoid new lengths. If closed at the top 712 level on daily scale, then fresh buying can be seen,” Patel said.

Paytm Technical Chart.

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Devan Mehta, Equity Research Analyst Choice Brokering believe 730 level is the key level for the stock. He observed that the stock was trading in a tight range 695-730 for the last three weeks. Currently, it is trading above all major moving averages.

Mehta highlighted that the stock is rebounding from low levels 695, which is close to the 20-day EMA (Exponential Moving Average) level, once the stock crosses the upper band of the range. 730, it can move to the next major resistance 845.

“The RSI indicator is trading near 56 levels indicating strength. Also, the stock is trading near the middle band of the Bollinger Band, squeezing the band. Once the stock crosses 730 level will expand Bollinger Band and help the stock to move forward 845 level and above,” said Mehta.

Disclaimer: The views and recommendations provided in this article are those of individual analysts and brokerage firms. These do not represent the views of Mint. We advise investors to check with certified experts before making investment decisions.

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