What Should Investors Do After Paytm Hits Over 3-Month High and Surges Over 20 Percent in a Month?

Updated: Jul 25

Shares of the fintech company Paytm's parent company, One97 Communications, touched a more than three-month high of Rs 739 as the stock rose 4% on the BSE on Thursday during active trading. Paytm was trading at Rs. 737 at 10:55 a.m., while the S&P BSE Sensex had increased by 0.43 percent.

Stock Price History

The price of the Paytm stock was the highest it had been since March 11, 2022. The stock has increased 36% over the last two months and is now up 44% from the record low of Rs 511 it reached on May 15, 2022.

Despite its rapid growth over the last two months, Paytm has underperformed the market, plummeting 34% in the past six months compared to Sensex's decline of 12%. The stock is currently trading 66% below its share issuance price of Rs 2,150. On November 18, 2021, Paytm made its debut on the stock exchange. On the day of its debut, November 18, 2021, it reached a record high of Rs 1,961.05, however, it has not yet reached its issue price.

Paytm's overall gross merchandise value (GMV) increased significantly (over 101 percent YoY) to 2.96 trillion during the first quarter of fiscal 2022–23 (Q1FY23). With an average monthly transacting user (MTU) of 74.8 million for Q1FY23, up 49% YoY, consumer engagement is at its best on Paytm Super-App.

In comparison to Q1FY22, the total number of loans disbursed increased by 492% YoY, from 1.4 million to 8.5 million. In Q1FY23, the total amount of loans disbursed increased 779 percent year over year to Rs 5,554 crore (from Rs 630 crore in Q1FY22). Disbursements for the lending industry are currently occurring at a run rate, every quarter of Rs 24,000 crore annually. A scale-up in personal loans is causing an ongoing increase in average ticket size.

What Do Analysts Say?

Yes, Securities anticipates a 17.5% QoQ increase in overall revenue from operations for Paytm. "With consistent loan disbursements and the inclusion of additional devices, we anticipate Paytm to report solid sequential revenue growth. On March 11, the RBI imposed a ban on new customers for the Payments Bank; this ban would have an impact, it was stated.

ICICI Securities predicts operating revenue growth of roughly 6% every quarter. The company's adjusted EBITDA (EBITDA before ESOPs) should increase as a result of management's focus on enhancing operating profitability, according to the statement.

The payment and financial services sector generates about 78% of Paytm's sales, while commerce and cloud services generate 20%.

"We anticipate significant revenue growth for Paytm across all of its business sectors, driven by device monetization in payments, cross-selling of financial services, ticket recovery, and increased ad monetization. We anticipate sales to increase by >40% CAGR to $2.8 billion over the period F22-26 and CMs to reach 44% by FY26E. In recent research, analysts at JP Morgan stated that they expected the company to maintain the top sales and profit levels among local vertical and international horizontal counterparts.

The counter established a foundation at the 500 level as some value purchasing emerged followed by a period of wealth destruction, according to Santosh Meena, Head of Research, Swastika Investment Ltd. Currently, it is seeing a breakout of the important obstacle of Rs 700 with respectable volume, which could trigger a brief upswing into Rs 870/Rs 990 levels. 670 will serve as an immediate and robust support level on the downside.

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