Paytm share gains 4% to hit 3-month high; should you buy, sell or hold?

Shares of One97 Communications, the parent entity of payment solutions company Paytm, continued its gaining streak for the second straight session on Thursday and jumped over 4% in intraday trade as investors cheered its stellar operating performance in the June quarter of 2022. The share price of the fintech company has gained as much as 4.4% to ₹739 during the session so far, breaching its highest level since March 11, 2022.

Paytm shares have gained momentum in the past two months after global brokerages, including Citi, JP Morgan and Goldman Sachs, turned bullish on the stock despite poor performance since its listing on the domestic bourses in November last year. The counter has rallied 36% in the past two months, regaining some ground after losing 45% in the current calendar year. Overall, the stock has corrected more than 65% from its initial public offering (IPO) issue price of ₹2,150 after making a weak market debut on November 18, 2021. The stock touched a 52-week high of ₹1,961.05 on its debut, while it touched a 52-week low of ₹511 on May 12, 2022.

Technically, the stock trades “sideways”, higher than its 5-day, 20-day, 50-day, and 100-day moving averages, but lower than its 200-day average. Paytm share price has gained 4% in a week and 20% in a month, while it has fallen 35% in the six-month period. The counter has seen a huge correction since its debut on the exchanges.

Bullish rating boosted stock

Last month, global brokerage house JP Morgan retained its bullish stance on Paytm, but slashed its target price to ₹1,000 from ₹1,200 earlier. The agency, however, maintained its ‘overweight’ rating on the stock, citing improvement in margins and better cost control. The brokerage opined that improved profit markets set the stage for operating leverage from the second quarter.

Another global brokerage Citi recently initiated coverage on Paytm with a buy rating, saying that the financial services firm has been seeing steady improvement in payments monetisation and scaling up financial services rapidly. The brokerage house has given buy rating with a target price of ₹915 per share.

Among others, Goldman Sachs has given a target price of ₹1,070, citing the company’s improving monetisation of the payments vertical and stellar growth in financial services and cloud businesses.

In sharp contrast, Macquarie has kept the target price intact at ₹450, saying that profitability is still an uphill task for the company.

Meanwhile, the Vijay Shekhar Sharma-led firm has reported robust performance in the April-June quarter of 2022, with its loan disbursement soaring nearly nine-fold to ₹5,554 crore through 84.78 lakh transactions at an annualised run rate of ₹24,000 crore. Monthly transacting users of Paytm Super-App stood at 74.8 million for the quarter under review, up 49% on yearly basis.

As per the company, the merchant gross merchandise value (GMV) processed through its platform aggregated to around ₹2.96 lakh crore ($37 billion), marking a YoY growth of 101%. Offline payments leadership also strengthened with a total number of devices deployed approximately at 3.8 million, it said.