Paytm shares in focus: Why Goldman Sachs upside
Today’s attention was focused on Paytm shares (formerly known as One97 Communications), after international stockbroker Goldman Sachs gave the provider of digital payments an outperform call. Goldman Sachs is optimistic about the Paytm business model and has kept its target price at Rs. 1,100, which represents a 61% increase over the previous closing. Encouraged by the news, Paytm stock increased by up to 3.4% today to Rs 707.9 from its previous closing on the BSE of Rs 684.60. Paytm stock was trading above its 100-day moving averages, but below its 5-, 20-, 50-, and 200-day moving averages.
The stock, however, lost 47.69% in 2022 but fell 10.02% in a single month. On the BSE, Paytm’s market value increased to Rs 45,420 crore. A total of 0.47 lakh shares of the company were traded for a total revenue of Rs 3.30 crore. On November 18, 2021, the stock reached a 52-week high of Rs 1,961.05, and on May 12, 2022, it reached a 52-week low of Rs 511.
Goldman Sachs stated in a note, “In our internet coverage, we consider Paytm to be one of the most intriguing growth stories at a competitive price because the business model is continuing to demonstrate good traction. Since our beginning (in December ’21), we have consistently increased our estimates by c.13% (FY24 revenues), and we are currently 5%/24% ahead of expectations on FY25 revenue/adjusted EBITDA as we anticipate accelerated profitability from increased growth in high margin categories.”
Goldman Sachs continued, “We retain our Buy rating on Paytm with an unchanged 12 month SOTP-based target price of Rs. 1,100 that indicates 61percent upside, and add the stock to Conviction List. Valuation is at 3.6x FY24 EV/Sales, a 30% discount to India online peer group.
Paytm reported a revenue increase of 88% in the first quarter of the current fiscal year. The business stated that it was still optimistic about meeting client demand for platform usage and monetisation as well as its ability to achieve break-even by the third quarter of 23.