Paytm share price target: Analysts expect stock to grow up to 63% on long-term basis – What should investors do?

One-97 Communications-backed Paytm share price may grow up to 63 per cent on a long-term basis, believe two global brokerage firms Goldman Sachs and JP Morgan on the back multiple triggers, including the possibility of the fintech company to witness breakeven by September 2023.

According to JP Morgan, Paytm has been improving the margins of its payments business driven by scale-up of merchant devices rationalizing processing costs. The second quarter of fiscal 2022-23 earnings will be key to see evidence of loss reduction and increasing confidence in breakeven, it said.

While Goldman Sachs in its report said that Paytm is well-positioned given its industry-leading scale and engagement. In the last few quarters, Paytm has been able to rapidly increase cross-sell on its platform, resulting in improving profitability.

The fintech company has been consistently adding new lenders/partners on its platform – three new lenders in last 12 months, including India’s largest private sector lender HDFC Bank – which suggests confidence on Paytm’s ability to expand their TAMs while keeping loan losses low, Goldman said.

The stock currently trades at 3.6x FY24 revenues, similar vs global peers, but with a CY21-24E sales CAGR of 38%, vs 29% for the peer group, Goldman said. “On EV/gross profit, however, Paytm at 5.6x FY24 GP, trades at an 11% discount to peers, for a gross profit growth that is 1.3x vs peers.”

Even within India internet, Paytm’s growth outlook is similar vs peer group, but valuation is at the lower end, it added, believing Paytm’s current share price continues to offer a compelling entry point into India’s largest and amongst the fastest-growing fintech platforms.

Goldman maintained Buy rating on the stock with target price of Rs 1100 per share, implying 63 per cent upside. While JP Morgan value Paytm using a DCF valuation baking in rising cost of capital with a 18.5% COE and 20x exit multiple that implies a Rs 1,000 apiece target, implying 48 per cent upside.

The share price of Paytm was closed over 2 per cent higher to Rs 675 per share on the exchanges on Tuesday.