Once bearish on Paytm, Macquarie has a change of heart; stock rises for 3rd day

Paytm shares surged on Wednesday, extended gains to the third session in a row, after Macquarie upgraded the digital payments firm to ‘outperform’ from ‘underperform’ and nearly doubled its target price for the stock. The stock of Paytm owner One97 Communications surged as much as 10 per cent to Rs 644.9 apiece on BSE, taking its cumulative gain to 22.9 per cent in three days

In a U-turn on its stance on Paytm, Macquarie brokerage raised its target price by Rs 350 to Rs 800 along with the upgrade — implying upside potential of around 36 per cent from its closing price on Tuesday.

“Paytm has positively surprised on the distribution of financial services revenue by a wide margin and has also managed to control overall expenses and charges,” Macquarie said.

“At the time of listing, profit and free cash flow were not even a part of management’s discussion. However, we see a very visible change in the approach of management to deliver profit, evidenced, we believe, by the core EBIDTA profitability that was reported recently," it added.

Earlier this month, One97 Communications reported a near halving of its quarterly net loss. According to a regulatory filing, Paytm’s net loss came in at Rs 392 crore for the quarter ended December, as against a net loss of Rs 778.4 crore for the corresponding period a year ago.

Paytm management commentary

“I wrote to you on April 6, 2022, and set a target for EBITDA before ESOP cost breakeven by the September 2023 quarter... I am very happy to share that our company has achieved this milestone of EBITDA before ESOP cost profitability in the December 2022 quarter itself... three quarters ahead of our guidance,” said Vijay Shekhar Sharma, Founder and CEO, Paytm.   

Anil Singhvi's take on Paytm shares

Zee Business Managing Editor Anil Singhvi suggested existing investors to continue to hold Paytm shares in their portfolio. "Those entering the stock now are coming at the right valuation," he said.  

Earlier, Singhvi had said that those owning stocks of new-age companies such as Paytm should avoid selling their holdings at "just about any price".

Catch latest stock market updates here. For all other news related to business, politics, tech, sports and auto, visit Zeebiz.com.