Paytm shares have demonstrated impressive resilience and strength in recent months, recovering from a challenging first half of the current year characterised by regulatory concerns. Over the last five months, the stock price has jumped 103% to ₹731 apiece.
This resurgence is primarily driven by the company's improving prospects across various business segments, which has notably boosted investor sentiment and renewed confidence in its growth potential.
Several brokerages have positively responded to these developments by revising their target prices upward.
Analysts believe the recent developments can strengthen the company's fundamentals, potentially setting Paytm on an early path to profitability.
Over the past three months, several key developments have emerged that suggest a reduction in pain points and a normalisation of prospects across Paytm's business segments. These include the successful completion of Paytm's handle migration and the clearance of regulatory hurdles concerning FDI for the Payment Aggregator (PA) license.
Additionally, UPI consumer data indicates stability in Paytm's market share, while the company has expanded its partner network within the financial distribution business.
These positive advancements have bolstered the confidence of domestic brokerage firm Dolat Capital. The brokerage anticipates that the company will achieve its guidance of reaching adjusted EBITDA breakeven by Q4 FY25 (excluding UPI incentives), thereby implying a transition to positive cash flow.
It believes Paytm's business is resilient and well-positioned for robust growth. Consequently, the brokerage lifted the target price for Paytm to ₹920, maintaining its 'buy' rating.
"Paytm remains in a bright spot of continued rapid growth in digital payments in India. We believe that the company has potential for growing its revenues multi-fold over the next decade and is expected to deliver steadily growing profits FY26E onwards," said Dolat.
In September, Emkay Global Financial Services upgraded its rating on Paytm from ‘Reduce’ to ‘Add,’ doubling its DCF-based target price to ₹750 per share from the earlier ₹375.
The brokerage highlighted that the easing of regulatory pressures would likely lead to approvals from NPCI and RBI, enabling Paytm to onboard new users and merchants, which will drive business recovery. This, coupled with its cost optimization measures, should put Paytm on the early path to profitability.
Emkay also pointed out Paytm’s strong market presence, maintaining a merchant base of approximately 41 million, and emphasised the growing importance of its merchant lending business as a key driver of future growth.
Mirae Asset Capital Markets, after discussions with the company's management, highlighted several positive developments. The firm noted that Paytm is seeing a recovery in its operating metrics and has strong growth prospects for its core business, with a growth outlook that exceeds industry averages.
It said the company's management is confident of achieving a 15-20% EBITDA margin over the next 3-4 years and aims to reach EBITDA break-even (excluding ESOP expenses) by Q4FY25. Additionally, the company plans to deploy 1 million new devices starting Q3 FY25 and is focused on alleviating regulatory concerns, with plans to leverage its cash reserves for strategic M&A activities.
Mirae further emphasised that with regulatory headwinds easing, Paytm's decline in revenue and profitability has likely bottomed out, positioning the company for a solid business recovery in the near future.
Ventura Securities also maintained a positive outlook on Paytm, viewing its business model as robust and its technology as a gold standard. With UPI emerging as the dominant digital payments medium and Paytm’s Soundbox (+POS) becoming a critical tool for merchants, Paytm is well-positioned to capitalise on these trends.
The brokerage forecasts robust growth for Paytm between FY24 and FY27E, with revenue, contribution profit, and pre-ESOP EBITDA projected to grow at a CAGR of 14.1%, 15.6%, and 54.5%, respectively. By FY27E, it expects Paytm's revenue to reach ₹14,531 crore, while EBITDA and net earnings are anticipated to turn profitable at ₹1,379 crore and ₹1,388 crore, respectively, compared to losses of ₹908 crore and ₹1,417 crore in FY24.
The brokerage highlighted key growth drivers, including a substantial rise in GMV from payment services, a fourfold increase in loan disbursements, and the expected resumption of services such as Paytm Wallet and BNPL, once regulatory hurdles are addressed.
With a focus on expanding its core payments and financial services, Paytm is well-placed to benefit from the digital economy’s growth, the brokerage said while initiating coverage on the stock with a 'buy' rating and a target price of ₹1,170, indicating a 117.6% upside over 24 months.
Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.
