March 19 witnessed a significant uptick in the share price of One 97 Communications, the parent company of Paytm, as it soared nearly 5% following its previous session’s gains. Notably, the stock has witnessed a remarkable 14% surge over the past three days. This bullish momentum coincides with Yes Securities’ decision to upgrade the payments company’s stock rating from “neutral” to “buy”, coupled with a substantial increase in the target price to Rs 505 from Rs 350.
The recent optimism surrounding Paytm can be attributed in part to NPCI’s approval allowing the company to participate in UPI as a third-party application provider (TPAP), which significantly expands its payment facilitation capabilities. Yes Securities’ rationale for the upgrade also underscores Paytm’s decreasing reliance on the wallet business for revenue, minimal client attrition despite reputational challenges, steady growth in partner acquisitions, and the competitive advantages inherent in the company’s DNA.
Yes Securities highlighted Paytm’s track record of past successes as indicative of its competitive DNA. According to the brokerage, recent developments, including regulatory feedback and a de-risking process, suggest a more stable trajectory for Paytm moving forward.
In terms of valuation, Yes Securities values Paytm at 2.7 times FY25E P/S, projecting an EPS CAGR of 78% for FY28-31E. Notably, their assessment does not incorporate any potential recovery in OCL’s Wallet business and adopts a relatively cautious stance on the loan distribution segment. The brokerage noted that current market sentiment may be overly pessimistic, with many perceived negatives already factored into the stock price.
Also read: Breaking News: Paytm Shares Skyrocket by 5%, Triggering Upper Circuit
Overall, Yes Securities’ assessment indicates a growing confidence in Paytm’s ability to navigate regulatory challenges and capitalize on future growth opportunities, underpinning their decision to upgrade the stock rating and revise the target price upwards.
Analysts at Yes Securities cautioned that the discontinuation of the wallets business will hurt Paytm’s revenues in the near term. “Loan distribution is presently stalled and continues to weigh on growth,” it added.
At 11:35 am, Paytm was trading at Rs 408.45 on the National Stock Exchange (NSE), 4.95 percent up from the previous session. The stock has rallied 14 percent in the past one month. Year-to-date, however, the scrip is down 36 percent.
Disclaimer: The opinions and investment insights provided are intended solely for informational purposes and should not be construed as financial advice. Bystox.in strongly advises users to consult certified financial experts or professionals before making any investment decisions. We emphasize the importance of conducting thorough research and seeking personalized guidance tailored to individual financial goals and circumstances. Please be aware that investing involves inherent risks, and past performance is not indicative of future results. Bystox.in does not assume any responsibility or liability for the accuracy, completeness, or reliability of the information provided. Users are encouraged to exercise caution and diligence in their investment endeavors. Remember, your financial well-being is paramount, and seeking expert advice is highly recommended.