paytm: Up 45% in 3 months, Paytm among top fintech stocks globally. Will the magic last?
“Paytm has been one of the top fintech stocks globally over the past 3 months… The stock is now trading at around 5.5x FY23E EV/sales, broadly at similar levels to other companies. However, we note that Paytm’s revenue growth, at 37% FY22-25E CAGR, is higher compared to global peers at 28%,” global brokerage Goldman Sachs said in a report.
Reiterating its buy call on Paytm with a revised target price of Rs 1,100, Goldman has raised its EBITDA estimates for the company and now expects FY24 to be the first full year of adjusted EBITDA profitability.
“We believe Paytm’s 1QFY23 results should help provide more visibility to investors on the company’s path to profitability (adjusted EBITDA improved 25 percent QoQ), and we see this as a key catalyst for the stock,” it said.
Morgan Stanley has also raised its earnings estimates by 5-9 percent on the stock. “Our price target increases to Rs 785 given forward valuations by 6 months, higher earnings and slightly higher valuation multiples (EV/earnings) at US peers,” it said.
In the bull case scenario, the brokerage said the Paytm stock deserves a target price of Rs 900, while in a worst-case scenario it could fall up to Rs 225.
CLSA, on the other hand, has a Sell rating with a target price of Rs 650.
“Most P&L numbers were broadly in line with our expectations, while payment processing costs were significantly lower. This led to a 13bp net take rate in 2QFY23 itself, while we expected it to happen in FY24. We lower our Ebitda loss estimates for FY23/24 by Rs3bn-Rs4bn and increase our target price from Rs 500 to Rs 650,” it said.
said that the recent rally in the share price is an opportunity to trim its stake in Paytm.
“We like management’s approach to improve efficiency and focus on profitability. However, the path to sustained improvement is likely to come at lower growth, and we continue to see downside risks to current cap rates on the financial services distribution business,” it said.
has maintained its buy rating with an unchanged target price of Rs 1,285 based on customer lifetime value methodology.
However, the brokerage is concerned about the decline in ‘payment service to sellers’ and cloud revenue and higher marketing and advertising costs.
JP Morgan has maintained its price target of Rs 1,000. “This is supported by a SOTP valuation that benchmarks EV/sales multiples to global peers at 4x/10x/4x/8x for its payments/financial services/commerce/cloud businesses,” it said, adding that Paytm has a unique capability to drive revenue generation and profit across multiple segments at a lower customer acquisition cost compared to others.
Last Friday, Paytm reported that net loss widened to Rs 644.4 crore in June, but revenue rose 88.5 percent to Rs 1,679.6 crore. against the background of strong income generation in payments, unit subscriptions and accelerated use of high-margin businesses such as lending.
Paytm said it is now well on its way to achieving operating profitability on the back of better cost efficiency.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
