Following a 90% rebound from a 52-week low, global brokerage company Macquarie downgraded Paytm from outperform to neutral, with a target price of Rs 800.
While attributing the downgrade to the recent rapid rise in share prices, Macquarie analyst Suresh Ganapathy believes China's Ant Financial may be trying to reduce its 25% ownership, which might be an overhang.
He also sees threats from Jio Financial Services (JFS) entry into the financial services market. RIL chairman Mukesh Ambani is likely to make JFS-related announcements during the company's annual general meeting this year.
In terms of earnings, the brokerage has made no modifications and anticipates Paytm reporting accounting profitability by FY26. Despite the downward revision, Paytm shares gained more than 2% on Tuesday to the day's high of Rs 858 on the BSE.
Macquarie has been one of the largest bears on Paytm since its debut, but it reversed course late this year. Paytm gave the stock an underperforming rating in November 2021, with a target price of Rs 1,200, which then decreased to Rs 450 in March 2022.
However, as the fintech's loss decreased in Q3, the brokerage awarded the company a double upgrade and upped its target price by 80% to Rs 800 in February this year.
Paytm founder and CEO Vijay Shekhar Sharma has committed to making Paytm's free cash flow positive shortly after announcing second-quarter EBITDA (before ESOP cost) profitability in Q4. BofA Securities, a worldwide brokerage firm, boosted its target price to Rs 1,020 from Rs 885 last week, citing progress in high-margin lending and the Soundbox business.
The brokerage business raised its FY25/26E EPS to -3.86/5.29, resulting in a Rs 1,024 gain in DCF value. We additionally raise the payments/financial services multiple to 3.5x/6x (from 3x/5x) to factor in re-rating of global peers and estimate a narrowing gap for Paytm given its improved business momentum, it added, reiterating its buy recommendation based on a favorable risk-reward ratio.
