Paytm share price surges on 89% revenue growth, narrowing losses in Q1; brokerages divided

Shares of One97 Communications that operates the brand Paytm jumped around six per cent in Monday's intraday trade after the digital financial services provider reported 89% year-on-year (YoY) revenue growth to Rs 1,680 crore in the quarter ended June 2022.  

Paytm, however, reported a consolidated net loss of Rs 644.4 crore in the April-June period. The net loss widened from a loss of Rs 380.2 crore on YoY basis, but narrowed from Rs 761.4 crore in the March 2022 quarter.  

The stock jumped around six per cent to Rs 833.05 per share in early trade on the BSE. On Monday's high, the counter is still trading at over 57 pe cent discount from its 52 week high value of Rs 1961.05.  

Meanwhile, brokerages were divided on the counter post Q1 earnings.  

Brokerage house Yes Securities upgraded Paytm from 'Reduce' to 'Neutral'. Acknowledging improvement in trajectory, the brokerage revised target price to Rs 850 per share. It is 8% upside on Friday's closing price of Rs 784 per share.  

Goldman Sachs was the most bullish among brokerages. It did not only maintain its buy rating, but also revised the target price from Rs 1050 to Rs 1100 a share.  

"Forecast a robust 37% FY22-25E rev CAGR, at higher end of global fintech peers. We believe next catalyst could be potential resolution of user on boarding ban on Paytm Payments Bank," said the brokerage.  

Macquarie maintained an underperform rating for a target price of Rs 450. It feels the loss was below estimates due to the better than expected net payment margin.   

"However, longer-term concerns remain on competition and regulations loan distribution gathers steam, but concerned about longer term take rates and sustainability," it added.   

Morgan Stanley maintained an 'equalweight' rating and raised its target price from Rs 675 to Rs 785 per share, while JP Morgan retained overweight rating for a target price of Rs 1000.   

Saying sharp reduction in processing costs the key surprise, CLSA recommended a Sell.  

"While our Ebitda breakeven expectation is similar to that of management, the stock factors in a long-term Ebitda trajectory that we think is difficult to achieve. We maintain our SELL rating," it said.  

Interestingly, CLSA increased its target price from Rs 500 to Rs 650 for Paytm.