Paytm shares: After Morgan Stanley, another top broker assigns 'overweight' rating
Premium- Paytm shares have declined 38% since its dismal listing and a spate of bearish views, underperforming the Nifty sharply
Global brokerage JPMorgan has initiated coverage on Paytm's parent One 97 Communications. Paytm shares have declined 38% since its dismal listing and a spate of bearish views, underperforming the Nifty sharply and trading at a discount to global and private peers.
“We view Paytm as a one-of-a-kind “fintech horizontal" given its ability to drive monetization across categories and defray customer acquisition costs (CAC) across a range of products," analysts at the global brokerage firm said in a note on Tuesday.
Paytm has the potential to deliver around 60% revenue growth and around 10x expansion in contribution profits over FY21-24, driving cash breakeven and positive free cash from FY25 onwards without draining much of the excess cash on balance sheet, as per JPMorgan.
They expect Paytm to sharply beat consensus FY23/24 GMV/revenue growth expectations and expect this to be the primary share price catalyst. JPM's overweight stance on Paytm comes with a target price of ₹1,850 per share.
The key risk, in JPM's view, is the credit loss in the lending business (though Paytm does not take credit risks on its books). “Given the low ticket size nature of lending and an unseasoned book, a through-cycle credit loss in the portfolio is not yet established. We are less concerned about competitors as most are focused on the non-monetizable UPI business or are vertical-focused fintechs that have a fraction of the revenue of Paytm," the note stated.
In a note on December 23, another top broker Morgan Stanley said it started coverage on the digital payments startup Paytm shares with an overweight rating and a price target of ₹1,875 as it sees attractive risk-to-reward and values the firm at $17 billion.
Paytm’s “profitability should improve sharply as financial services scales up" with the company breaking even at operating profit level in fiscal year 2025, analysts at Morgan Stanley had said.
One 97 Communications Ltd, Paytm’s parent company, raised $2.5 billion in its IPO, but a 27% plunge in its 18 November debut made it one of the worst initial showings by a major technology firm since the dot-com bubble era of the late 1990s.
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The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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