Paytm stock climbs to 13-month high as UBS raises target price, up 200% from record low

Stock Market Today: Shares of One 97 Communications, the parent company of Paytm, surged nearly 3.40% in Thursday's trade to hit a 13-month high of ₹950 apiece, bringing the stock closer to the ₹1,000 level.

The stock has been drawing significant attention on Dalal Street due to several positive developments, with the latest being a target price hike by global brokerage firm UBS. The brokerage raised its target price for Paytm to ₹1,000 from ₹490 apiece while maintaining a 'neutral' stance on the stock.

UBS noted that much of the improvements have already been factored into the stock price and emphasised that the next phase of growth must be driven by revenue, as most cost optimisation efforts have already been realised.

For FY26, Paytm’s revenue is expected to align with FY24 levels, and the adjusted EBITDA break-even is likely to occur by Q4 FY25, it said, adding that the stock has also seen a sharp re-rating, with key regulatory issues now resolved. 

This target price revision marked the second upgrade in a week, following a similar move by Bernstein, which raised its target price on the stock to ₹1,000 from ₹750, reaffirming its bullish stance on the fintech company.

Bernstein expects Paytm to expand its lending operations and improve payment margins, potentially doubling its base-case earnings per share (EPS) estimates. The brokerage highlighted several growth drivers that could propel Paytm’s profitability, including a recovery in payment margins, regulatory changes, and the company's lending strategy.

Earlier, Citi also lifted its rating on Paytm from 'sell' to 'buy' and increased the price target to ₹900. Additional positive developments surrounding the stock include approval from the National Payments Corporation of India (NPCI) to resume onboarding new UPI customers, removing a key regulatory overhang. 

However, analysts caution that Paytm has not cleared all regulatory hurdles. The Reserve Bank of India (RBI), the country’s financial regulator, has yet to grant Paytm a license for payment aggregation, a third-party service allowing businesses to accept and disburse payments online.

The company reported a net profit of ₹928 crore for Q2FY25, its first ever since listing in 2021. However, this was primarily driven by a ₹1,345 crore gain from the sale of its ticketing business to food delivery company Zomato.

Stock recovers over 200% from all-time low

Today's rise has propelled the stock to a 24% gain in November so far and a remarkable 203% increase from its all-time low of ₹310. Between January 2024 and May 2024, however, the shares faced continued selling pressure, losing nearly 51% of their value.

This decline followed the Reserve Bank of India's (RBI) decision in January to wind down Paytm's banking unit due to persistent compliance issues. Despite the stellar recovery, the stock is still down 51.81% from its all-time high of ₹1,955 apiece.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.