After Q4 results, Paytm's stock increased; should investors book a profit, buy, or hold?

One 97 Communications, the company that owns Paytm, saw its shares rise as much as 10% on Monday after losing 4% during the previous trading session. Paytm reported that its net loss for the three months ending in March increased to Rs 761.4 crore from Rs 441.8 crore during the same period last year. Losses in the December quarter were just a little less than Rs 778 crore. Operational revenue increased by 88.99% to Rs 1,540.9 crore from Rs 815.3 crore in the same period last year.

The large-cap stock opened down 3.99% at Rs 552.4 compared to BSE's previous closing of Rs 575.35. The price of Paytm stock is below the moving averages of five, twenty, fifty, one hundred, and two hundred days.

Shares of Paytm were up 6.2 percent at Rs 610.90 on the NSE at 12:03 IST. At Rs 552, the stock's intraday low was reached.

From December 19, 2022, through December 18, 2027, the business reappointed Vijay Shekhar Sharma as managing director and chief executive. In addition to the firm's announcement of an investment of Rs 950 crore over 10 years in general insurance, this reappointment, according to a fund manager, offers investors confidence in the company's commercial prospects.

One 97 Communications announced that the Board of Directors of the Company (the "Board"), at its meeting held on May 20, 2022, had considered and approved re-appointing Vijay Shekhar Sharma as "Managing Director & Chief Executive Officer" of the Company for a tenure of 5 years beginning on December 19, 2022, and ending on December 18, 2027. This decision was made based on the recommendations of the Nomination and Remuneration Committee and is subject to shareholder approval.

Paytm Share: Should You Buy, Sell or Hold?

The business trajectory is commendable, but there is still a fair amount of runway for profitability, according to Yes Securities. The brokerage business added, "MDR-bearing instruments GMV and payment devices drove a 90% YoY increase in revenue from payments services to merchants to Rs 5.72 billion. The value of loans disbursed increased, driving a 342 percent YoY increase in revenue for financial services and other categories to Rs 1.68 billion.

With a lowered price objective of Rs. 580, it stated in a note, "We retain 'Reduce' on PAYTM and value PAYTM at 5.5x FY23 P/S, factoring in customer addition embargo and heightened regulatory risk.

The stock continues to be rated as a buy by ICICI Securities. "On the strength of rising contribution margins and declining indirect expenditures as a percentage of operating sales, management is confident of attaining operating profitability (positive EBITDA before ESOP cost) by Q2FY24. We continue to be cautious and anticipate that the company will have a positive EBITDA by FY25E. Based on the customer lifetime value methodology, maintain BUY with a target price of Rs 1,285, it added.

Since profitability is still a challenge and Ebitda losses may take 12 quarters to break even, Macquarie has maintained its Rs 450 target.

According to Goldman Sachs, Paytm's loan business has successfully expanded while maintaining solid credit metrics, which should help ease investor concerns even more.

According to Goldman Sachs, "overall, we improve our topline estimates by 3–4% and expect growth momentum to maintain; we forecast 90% YoY revenue growth for Paytm in 1QFY23, with 38% FY22–25E revenue CAGR."

"Paytm's 4QFY22 results demonstrated another quarter of strong and improving payments vertical monetization, while growth momentum for financial services and cloud businesses remains robust. All this while cash burn has been improving, and the company reiterated its guidance of adjusted Ebitda breakeven by September 2023, which we see as a key catalyst for the stock," Goldman Sachs said as it suggested a target of Rs 1,070 on the stock.

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