Paytm shares zoom 20% on strong Q3 results; Goldman Sachs upgrades target

The shares of One 97 Communications, Paytm's parent, went up 20 per cent in Tuesday's trade to hit the upper price band of Rs 669.60 against a previous close of Rs 558 after the company's quarterly results beat Street expectations. The price of Paytm has gone up 27.57 per cent in two straight sessions, despite the high price of Rs 669.60. The counter lost half of its gains in late deals today.

Goldman Sachs has increased its target price for Paytm to Rs 1,150 from Rs 1,120 on the back of stronger Q 3 FY 23 December 2022 quarter results. It raised FY 24 EBITDA estimate by 30 per cent and FY 25 EBITDA estimate by 14 per cent.

The global investment research firm believes that Paytm's revenue growth could be up to 47 per cent YoY in Q 4 of FY 23 on account of around 130 crore in UPI incentives.

Paytm's loans business continued to see strong momentum with revenue growth of 256 per cent YoY in Q 3 compared to 293 per cent in Q 2 due to the RBI's restrictions on Paytm Payments Bank's proposed remediation measures, and the payments bank is taking necessary steps to comply with the central bank's suggested remediating measures, according to Paytm's quarterly positive cash EBITDA of Rs 30 crore in Q 3 FY23, a three quarters ahead of company guidance of September 2023 The restriction on onboarding new customers at PPBL has led to a limited operational impact, according to Paytm's monthly transacting users additions.

Goldman Sachs reiterated its 'Buy' rating and suggested that Paytm's current share price continues to be a compelling entry point into India's largest and most profitable fintech platform. BofA Securities said Paytm's December quarters beat Street expectations. It stated that this was due to rising high margin lending revenue, improving merchant subscription and reducing payment processing promotional charges.

The target price is Rs 730, and the brokerage has maintained a 'Neutral' call on the counter.

As of Q3 end, Paytm has an outstanding cash balance of $1.1 billion. BofA stated that Paytm bought back 146.7 crore shares and used Rs 796 crore cash on an average price of Rs 543 per share until February 3, 2023.

Paytm made its first attempt to test the 200-SMA post the strong surge, but failed to surpass the same convincingly. Osho Krishan, Senior Analyst Technical and Derivative Research at Angel One said that it is near the sloping trend line of the recent two swing highs and until it surpasses the Rs 650 -- 660 zone, timidity is likely to continue in the counter.

Krishan said that Rs 570 -- 550 may provide a cushion to any blip, followed by the strong support of Rs 520. In a comparable period, he said that Rs 650-660 is likely to act as immediate resistance, followed by the immediate swing high of Rs 720 levels.

The 14 day relative strength index RSI came at 50.92. A level below 30 is considered oversold, while a value above 70 is considered overbought. The company's stock has a negative P E ratio of 15.47.

The Indian equity benchmarks slipped in late deals that were dragged down by automobile, consumer and metals.