Paytm Share Price Swing After Goldman Upgrades To ‘Buy’

Shares of One97 Communications Ltd. swung after Goldman Sachs upgraded the operator of the digital payments platform Paytm to ‘buy’.

“Paytm’s share price is down 30% YTD (BSE Sensex +1%) and we now see risk-reward as skewed to the upside, with 119% upside in our bull case versus 14% downside in our bear case,” the financial services provider said in a Feb. 6 report.

Paytm’s top line growth of 89% year-on-year in Q3 FY22, the report said, will help allay investor concerns around declining payments take rate in recent years. Also, it continues to gain market share across both UPI and non-UPI, and its lending business is seeing robust traction.

Goldman Sachs raised its top line estimates for Paytm by 7-10% and expects growth momentum to sustain. It forecasts 89% year-on-year revenue growth in the ongoing quarter ending December, an estimates the top line to grow at an annualised rate of 35% from FY22E-25.

“We expect Paytm’s increase in scale to result in an improving margin trend,” it said. “Paytm has a strong balance sheet, and see limited likelihood of needing to raise capital again.”

Goldman Sachs said Paytm is well-positioned to capture market share in digital payments in India.

Shares of Paytm’s parent fell more than 7.5% at open but pared all losses to gain 3.27%. The stock closed 0.45% higher on Monday.

Of the eight analysts tracking the company, four maintain a ‘buy’, one suggest a ‘hold and three recommend a ‘sell’, according to Bloomberg data. The 12-month consensus price target implies an upside of 38.1%, according to Bloomberg data.