One 97 Communications Ltd (Paytm) and Zomato Ltd look set to offer healthy short-term gains, StoxBox suggested in its latest note. It recommended traders to buy Paytm shares for a target of Rs 615 in the short term, with a stop loss placed at Rs 530. For Zomato, it suggested buying the stock for a target of Rs 285 apiece, with a stop loss placed at Rs 252.
Paytm technical charts StoxBox said the pattern analysis of Paytm indicates potential signs of the stock reaching a bottom. The stock has recently shown a Bullish Cup and Handle breakout, suggesting a potential reversal in trend. The recent upward movement has been accompanied by short phases of accumulation, further reinforcing the potential trend, it said.
"Additionally, the price action has reclaimed its 200 DMA, providing immediate support, which is a positive sign," StoxBox said.
Zomato technical charts In the case of Zomato, the stock price has been on a strong uptrend since hitting a low point in January 2023, completing a full-circle and indicating potential momentum in the ongoing price trend.
"The stock has shown resilience to drawdowns below its shorter-term moving average, offering a low-risk, high-reward opportunity. Additionally, Zomato displayed an improving EPS, price strength, and strong buyer demand, which are all positive signs," StoxBox said.
Paytm fundamentals StoxBox said Paytm's business model is built on a large and active customer base of 7.8 million monthly transacting users as of June 2024. These users primarily use the app for UPI-based payments, bill payments, etc. It also supports Paytm's commerce business. This diverse customer base is instrumental in establishing Paytm's consumer loan origination portfolio, StoxBox said.
"Unlike many of its competitors who are primarily focused on point-of-sale and payment gateway services with little direct interaction with customers, Paytm has a significant presence among both consumers and merchants. This wide reach enables it to generate revenue from both merchants and consumers, and allows for cross-selling opportunities, providing a stable business model that can better withstand regulatory and technological changes," StoxBox said.
This brokerage expects revenue and profitability for Paytm to improve going forward.
Paytm is confident of meaningful improvement from Q2FY25, as the company restarted certain paused products and achieved steady growth in operating metrics. We believe constant improvement in operating leverage will continue to drive its profitability.
"As we advance, we expect revenue and profitability to improve, driven by growth in operating parameters such as GMV, an expanding merchant base, recovery in loan distribution business and continued focus on cost optimization," it said.
Zomato fundamentals Zomato, StoxBox said, noted that there were no specific concerns from restaurant partners regarding demand in the June quarter, indicating a stable outlook for the food delivery sector. The company exhibited strong optimism regarding growth prospects across food delivery and quick commerce segments, with strategic investments to enhance customer experience and service quality.
"They are navigating challenges focusing on maintaining profitability and expanding market share. Focus on expanding alternate business segments Zomato’s quick commerce segment, Blinkit, is on an aggressive expansion spree, with the management intending to double its store count in the year and hoping to increase its GOV by four times in the coming fiscals," it said.
"The management also plans to keep reinvesting into its quick commerce business to grow as fast as possible, and capturing a modest market share within this space. Moving to its B2B business Hyperpure, the management believes that as the business scales, the growth rate will observe a slight downward trend but remain healthy and high. The company is focused on improving its growth prospects and expects the margin to improve as the business grows," StoxBox said.