Paytm shares dive 9% after Alibaba sells stake; here's what tech analysts say

Shares of Paytm's parent, One 97 Communications, fell sharply in Friday's trade, halting their winning run of four straight sessions. The stock slipped 9.43 per cent to hit an intraday low of Rs 645.35 over its previous close of Rs 712.55. The stock eventually settled 8.75 per cent lower at Rs 650.20. Paytm has gained 19.18 per cent in the past five days.

The stock was in focus today after a report claimed that China's Alibaba Group sold its entire stake in the digital payment firm.

Also Read | Alibaba exits Paytm, sells over 2 crore shares in block deal: Report

The digital financial services company has narrowed its consolidated net loss to Rs 392 crore in the third quarter (Q3) that ended December 2022 (FY23) against a net loss of Rs 778.40 crore in the same period a year ago.

Paytm's revenue from operations jumped about 42 per cent to Rs 2,062.20 crore in Q3 FY23 from Rs 1,456.10 crore in the year-ago period.

At today's low level of Rs 645.35, the stock traded 46.80 per cent higher from its 52-week low of Rs 439.60, hit on November 24, 2022. Yet, the counter traded 33.40 per cent lower from its one-year high of Rs 969, touched on February 10, 2022. Considering the initial public offering price (IPO) of Rs 2,150, Paytm's share price has witnessed a massive slump.

That said, at least three global brokerages have recommended buying the counter after Q3 (December 2022) earnings. Goldman Sachs has upped its target price to Rs 1,150 from Rs 1,120 on the back of significantly stronger quarterly results. It noted that Paytm posted its first quarterly positive cash EBITDA of Rs 30 crore in Q3 FY23, three quarters ahead of company guidance (of September 2023).

Macquarie has upgraded the stock to 'Outperform' from 'Underperform' and raised its target price to Rs 800 from Rs 450. Citi has given a target price of Rs 1,061.

However, BofA Securities has maintained a 'Neutral' call on the counter.

Technical view

Osho Krishan, Senior Analyst - Technical & Derivative Research at Angel One, said, "As far as levels are concerned, Rs 570-550 is likely to provide a cushion to any blip."

AR Ramachandran from Tips2trades said, "Paytm stock price was overbought on the daily charts with strong resistance at Rs 705. Investors should book profits at current levels and wait for a dip near Rs 543-556 to initiate buy positions for targets of Rs 705-738 in the coming weeks."

The stock was last seen trading higher than 5-day, 20-, 50-, 100- and 200-day moving averages. The counter's 14-day relative strength index (RSI) came at 64.22. 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-equity (P/E) ratio of 19.76.

Paytm has an average target price of Rs 929.50, Trendlyne data showed, suggesting a potential upside of 41.25 per cent. The scrip has a one-year beta of 0.88, indicating low volatility on the counter.

Meanwhile, Indian equity benchmarks slipped today, dragged by metals, consumer goods, technology and energy stocks.

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