Paytm shares fall 8% even after analysts remain optimistic on profitability path - CNBC TV18
Shares of One97 Communications Ltd., the parent company of payments aggregator Paytm, are trading down by over 8% on Tuesday, January 21. Paytm reported its December quarter results during market hours on Monday. The company remained in a loss-making position, although the loss narrowed on a year-on-year basis.
Global brokerage firm Citi has maintained a 'Buy' rating on Paytm, with a price target of ₹900 per share.
The company reported a solid beat against expectations in Q3 adjusted EBITDA, primarily driven by lower corporate overheads.
However, the net payment margin was slightly below estimates. Paytm’s merchant business, which includes devices and DLG-loans, continues to show robust stickiness and sustained growth.
The company remains on track to achieve adjusted EBITDA break-even in Q4, excluding UPI incentives.
Paytm posted a lower EBITDA loss of ₹40 crore, compared to Emkay’s estimate of ₹70 crore. This improvement was mainly due to better lending revenue (even after adjusting for higher DLG costs) and continued cost optimisation measures.
Additionally, higher treasury income from the sale of the entertainment business and a stake in PayPay Corp, combined with lower depreciation and ESOP costs, led to a reduced net loss. The lower net payment margin was the only minor setback in Q3.
With the merchant payment and lending business performing well, and an improving MTU (monthly transacting users), Paytm is expected to build a strong funnel for its financial and merchant services revenue. This, along with better treasury income and continued cost optimisation, should put the company on a path toward profitability in FY26E. As a result, the brokerage recently upgraded Paytm to 'Buy' from its previous 'Add' rating, with a price target of ₹1,050.
Motilal Oswal has largely maintained its contribution profit estimates. The brokerage expects Paytm to become EBITDA positive by FY27. It values Paytm at ₹950 and has retained a 'Neutral' rating on the stock.
Following Paytm's quarterly results, Bernstein suggested a target price of ₹1,100 for the stock. The brokerage described the quarterly results as solid, especially in a challenging operating environment for lenders. Loan disbursals rose 6% sequentially, payment volumes surged due to a festive boost, and cost control measures continued, bringing Paytm closer to profitability.
Bernstein also noted that gross merchandise value (GMV) had recovered to the quarterly peak seen in December 2023, despite the loss of certain products due to regulatory actions in January 2024. MTU growth also saw an inflection, with MTUs in December rising to 7.2 crore, after stagnating at 6.8-6.9 crore in recent months.
Out of the 19 analysts that have coverage on Paytm, nine of them have a 'Buy' rating, six say 'Hold' and four of them have a 'Sell' rating on the stock.
Shares of Paytm are currently trading 5.88% lower on Tuesday at ₹845.80. The stock has corrected over 60% from its IPO price of ₹2,150.
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