Paytm shares hit upper circuit for second straight session, can they touch Rs 650 mark?

Shares of Paytm (listed as One97 Communications) hit upper circuit of 5% for the second straight session on Thursday amid a correction in the broader market. At 10:07 am, the stock gained 4.99% to Rs 401.55 on BSE. It has lost 46.17% in a year and fallen 41.59 per cent in 2024. The stock hit upper circuit of 5% on Wednesday after a report said Gautam Adani, the Adani Group chairman, was considering buying a stake in Paytm's parent company One97 Communications. Later, Paytm issued a clarification stating that the report was nothing but speculation.

In the current session, Paytm stock rose 5% to Rs 377.50 on BSE.  Market cap of the firm climbed to Rs 24,001 crore. Total 1.61 lakh shares of the firm changed hands amounting to a turnover of Rs 6.06 crore.

The stock fell to a 52-week low of Rs 310 on May 9, 2024  and hit a 52 week high of Rs 998.30 on  October 20, 2023.

The stock has a beta of 0.2, indicating low volatility in a year.

In terms of technicals, the relative strength index (RSI) of Paytm stands at 50.2, signaling it's trading neither in the oversold nor in the overbought territory. Shares of Paytm are trading higher than the 5 day, 10 day, 20 day, 30 day, 50 day but lower than the 100 day, 150 day and 200 day moving averages.  

Dolat Capital expects the stock to reach Rs 650, implying an upside of over 70% in a year.

"Paytm’s renewed focus on business growth & cost efficiency signals the right direction to revival. We have cut our FY25/FY26E revenue estimates by 8%/7% and expect profitability goals to further defer. However, we believe current market price does not factor a potential sharper recovery Q2 onwards and thus we maintain ‘Buy’ rating with Discounted cash flow (DCF) based price target of Rs 650 (implies 2.4x on FY26E EV/Sales)," said Dolat Capital.

YES Securities has revised its price target to Rs 450 on the stock as it values Paytm at 2.8 times FY26 price to sales.

“After being under pressure, merchant payments business has started to grow in April and May. On the other hand, monthly transacting users, which drive consumer payments business, are down 25 per cent compared with January. April was the worst month for MTUs but this has stabilised in May. MTU growth will happen once the TPAP commencement happens," said the brokerage.

In the Q4 of previous fiscal, consolidated net loss widened to Rs 549.60 crore from Rs 219.80 crore in the December quarter and Rs 168.90 crore in the same quarter last year.

Revenue from operations slipped 3 per cent year-on-year to Rs 2,267.10 crore against Rs 2,334.50 crore in the same quarter last year.

Paytm said its March quarter results were impacted by temporary disruption on account of UPI transition and permanent disruption because of Paytm Payments Bank Ltd (PPBL) embargo. Paytm has impaired the carrying value of company’s investment in PPBL.