Paytm shares extend gains, jump 4% to hit fresh one-year highs; more upside possible?

Shares of One 97 Communications Ltd, Paytm's parent, jumped 4.20 per cent to hit their fresh one-year high of Rs 892.65 in Thursday's trade. The stock continued to rise for the third straight session today. At today's high price of Rs 892.65, the stock traded 103.06 per cent higher from its 52-week low of Rs 439.60, a level seen on November 24 last year. That said, it has declined 58.48 per cent from its initial public offering (IPO) price of Rs 2,150.      

Last week, Paytm said it continued to expand its consumer base in May and that it made disbursements of Rs 5,502 crore for the month through the Paytm platform. Paytm said 75 lakh merchants are now paying a subscription for its payment devices, up 4 lakh in May, adding that its average monthly transacting users (MTU) rose 24 per cent YoY at 9.2 crore for quarter-to-date (average for April and May). Merchant Payment volumes (GMV) for the quarter to date stood at Rs 2.65 lakh cr or $32.1 billion, up 35 per cent, year-on-year (YoY).

The company reported a 51 per cent jump in revenue from operations at Rs 2,334 crore for the March quarter while it brought down its net loss in the fourth quarter to Rs 168 crore from Rs 761 crore a year ago, and Rs 392 crore in the December quarter.

At least two brokerages have given 'Buy' calls for Paytm this month.

CLSA has suggested a target price of Rs 850. "We use a long-term discounted earnings model to arrive at our target price. We factor in a risk-free rate of 7.25 per cent, beta of 1.25 times and risk-premium of 5.5 per cent. Our terminal growth rate assumption is 5 per cent, the brokerage said.

BofA Securities has given a target of Rs 855. "Paytm possesses potential for positive operational leverage and sits in a 'sweet spot' due to limited competition. It also highlighted other positive factors such as the growth of digitalisation driving payments and the company's robust cash balance," BofA stated.

Prashanth Tapse, Senior VP (Research) at Mehta Equities, said, "Technically, the stock can hit Rs 880-900 levels in the short term."

Gaurav Bissa, VP, InCred Equities said, "After witnessing strong correction since getting listed on Indian bourses, Paytm was seen trying to stabilize around Rs 500 levels. The stock showed a trend reversal on a smaller time period which pushed the stock from Rs 500 to Rs 600 levels. The stock recently gave a breakout from descending channel pattern on the weekly charts with incremental volumes suggesting fresh buying interest from the market participants.  The RSI was hovering around 60 levels after the breakout was confirmed which ensured the prices didn’t fall back below the breakout zone, however, the strength was still missing. Once the RSI went above 70 on the weekly timeframe, stock witnessed a fresh push which resulted in a fresh swing breakout on the weekly charts resulting in a smooth ride from Rs 750 to Rs 850 levels. Currently, the stock is trading comfortably above August 2022 hurdle placed at Rs 845 and once a weekly close is confirmed above this zone, Paytm is likely to witness another push which can catapult it towards Rs 1000 levels. The RSI is yet to enter overbought zone which implies there is sufficient room for a sustained upside going forward."

The stock was last seen trading higher than the 5-day, 20-, 50-, 100- and 200-day moving averages. The counter's 14-day relative strength index (RSI) came at 84.67. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company's stock has a negative price-to-earnings (P/E) ratio of 29.26. It has a price-to-book (P/B) value of 4.42.

The scrip has an average target price of Rs 925.33, Trendlyne data showed, suggesting a potential upside of 5.66 per cent. It has a one-year beta of 0.78, indicating low volatility on the counter.

Meanwhile, Indian equity benchmarks fell sharply in late deals today, halting their three-day winning run. The domestic indices were trading lower, dragged by banks, financials and technology stocks.

Also read: Medanta shares rise 4% to hit new highs; stock turns multibagger within 7 months of debut

Also read: Buzzing stocks on June 15, 2023: Cravatex, VBL, Bharat Dynamics, Lokesh Machines, etc