Paytm shares extend gains, jump 8% today; here's what brokerages & tech analysts say

Shares of One 97 Communications Ltd, digital payments from Paytm's parent, extended their gains for the second straight session in Thursday's trade. The stock jumped 8.05 per cent to hit a day high of Rs 785.50 over its previous close of Rs 727. At today's high price, the scrip has gained a little over 47 per cent on a year-to-date (YTD) basis. Turnover on the counter stood at Rs 73.54 crore on BSE today, commanding a market capitalisation (m-cap) of Rs 48,623.87 crore.

A couple of days back, Paytm, in an exchange filing, said it continued to expand its consumer base in May and made disbursements worth Rs 5,502 crore for the month. Paytm also said that 75 lakh merchants are now paying subscriptions for its payment devices. "Our leadership in payment monetisation continues, as subscription devices for payment devices like Soundbox and POS machines continue to see increased acceptance by merchants. The number of merchants paying subscription for payment devices has reached 75 lakh as of May 2023, an increase of 4 lakh devices in the month," the digital payments firm stated.

"Continued scale in our loan distribution business with disbursements of Rs 9,618 crore ($1.2 billion, year-on-year growth of 169 per cent) and 85 lakh loans (YoY growth of 54 per cent) distributed in the quarter to date (for April & May 2023)," it added.

Brokerages have been largely positive on the counter. BofA Securities has upgraded the stock to 'Buy' with a one-year target price of Rs 885. "We find Paytm well-positioned to continue to dominate the SME merchant landscape where the subscription model via Soundbox is improving merchant stickiness. We expect Paytm's momentum in BNPL/merchant lending to continue, albeit at a slower pace, leading to 34 per cent revenue CAGR (Compounded annual growth rate) from FY23-26," the brokerage stated.

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Motilal Oswal has also given a 'Buy' call, suggesting a target price of Rs 900. "Total gross merchandise value (GMV) remained strong and grew 35 per cent (YoY) in the two-month period of April-May 2023. Average monthly transacting users (MTU) grew 24 per cent (YoY) in April-May'23. The total number of devices deployed by Paytm surged 118 per cent (YoY)," Motilal stated.

The average ticket size is also witnessing a consistent increase due to a scale-up in post-paid and personal loans, it added.

ICICI Securities has a bullish view on Paytm as the brokerage suggested a target price of Rs 1,055. "Positive cycle of customer growth, retention and cross-sell playing out for the company is encouraging. Customer onboarding and an increase in use cases are helping growth," ICICI Securities stated.

Citi Research has also given a 'Buy' rating to Paytm with a target price of Rs 1,103.

On the technical front, analysts remained mixed on the counter.

Osho Krishan, Senior Analyst - Technical & Derivative Research at Angel One, said, "Paytm has seen a strong move over the news on rating upgrade. On the technical front, the stock has been able to sustain above the 200-SMA (Simple Moving Average) on the daily chart for quite some time, which adds to a positive development in the counter. As far as levels are concerned, the bullish gap of Rs 730-737 is likely to cushion any short-term blip, while a strong demand is placed around the Rs 700-odd zone, which coincides with its previous swing high. On the contrary, sustenance above today's bullish gap could lead the counter toward Rs 800 levels in the comparable period.

Vaishali Parekh, Vice-President - Technical Research at Prabhudas Lilladher, said, "The stock has given a huge spurt with volume participation breaching above the resistance zone of Rs 743-745 levels indicating a breakout and has scope for further targets of Rs 820-840 levels in the coming days. One can maintain the support zone of Rs 740-745 levels from here on. With indicators showing improvement in the bias, it can carry on the momentum still further ahead."

AR Ramachandran from Tips2trades said, "Paytm is bullish but also overbought on the daily charts. Investors should book profits at current levels as a fall till Rs 625 looks possible in the coming weeks."

VLA Ambala, Research Analyst at Stock Market Today, said, "The stock is in overbought conditions. Those who want to enter for higher targets must keep a stop loss placed at Rs 545."

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 73.94. 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 24.83. It has a price-to-book (P/B) value of 3.75.

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The scrip has an average target price of Rs 925.33, Trendlyne data showed, suggesting a potential upside of 18.65 per cent. It has a one-year beta of 0.85, indicating low volatility on the counter.

Meanwhile, Indian equity benchmarks slipped into the red today despite the Reserve Bank keeping the key policy (repo) rate unchanged, at 6.50 per cent, in its June bi-monthly policy meeting. The domestic indices, which were revolving close to their yesterday's record closing highs, fell in afternoon trade amid profit booking.

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