Paytm Share Price Rises 6%, Gains 19% Over Five Sessions Amid Bullish Projections - Read Now

Shares of One97 Communications, the parent company of Paytm, surged over 6% on November 22, marking the fifth consecutive trading session of gains. The stock has rallied an impressive 19% in just five sessions, driven by bullish projections from global brokerage Bernstein, which recently upgraded its target price for Paytm to ₹1,000 per share from the previous ₹750.

Bernstein's revised outlook underscores the fintech giant’s growth potential in lending operations and payment margins, positioning Paytm as a key player in India’s digital economy.

Bernstein’s Bullish Stance on Paytm

In its latest report, Bernstein maintained its ‘Outperform’ rating for Paytm, citing several growth opportunities. The brokerage emphasized a shift in the narrative surrounding Paytm—from concerns over its survival to optimism about its ability to generate long-term profitability.

The report outlines a bull-case scenario where Paytm expands its lending operations, improves payment margins, and leverages regulatory tailwinds to drive earnings growth. Bernstein believes these factors could double Paytm’s base-case earnings per share (EPS) estimates.

Key Growth Drivers Identified by Bernstein

1. Recovery in Payment Margins:
   Paytm’s current payment margins stand at 10 basis points (bps) due to regulatory pressures. Bernstein predicts a recovery to 15 bps, fueled by the rising popularity of products like wallets and credit-linked UPI transactions. This recovery could add 25% to the company’s EPS.

2. Regulatory Tailwinds:
   Changes in regulations aimed at curbing the dominance of rivals like PhonePe and Google Pay are expected to benefit Paytm. Bernstein estimates that these shifts could contribute an 8% EPS boost alongside a 25% compound annual growth rate (CAGR) in gross merchandise value (GMV) through FY30.

3. Expansion in Lending Operations:
   Lending is seen as a major growth opportunity for Paytm. The brokerage predicts that the company could enhance profitability by issuing loans through its balance sheet, supported by its NBFC license. This approach could reduce regulatory risks and increase EPS by 30%.

Bear Case Risks Highlighted by Bernstein

While Bernstein’s outlook is optimistic, it also acknowledged potential risks under a bear-case scenario. Sustained pressure on payment margins and slower-than-expected loan disbursal growth could lead to a 40% downside to the base-case earnings projections.

These risks highlight the need for Paytm to navigate regulatory complexities carefully while executing its growth strategies.

Recent Developments Bolster Market Sentiment

Recent regulatory changes and operational achievements have contributed to the positive sentiment surrounding Paytm’s stock:

• Regulatory Relief: The National Payments Corporation of India (NPCI) recently lifted restrictions on Paytm, allowing the company to onboard new UPI users. This development came after nearly nine months of limitations imposed by the Reserve Bank of India (RBI).
• Q2FY25 Profit: Paytm reported a net profit of ₹930 crore in Q2FY25, a significant turnaround from a net loss of ₹290.5 crore in the same period last year. However, this profit was largely driven by a one-time gain of ₹1,345 crore from the sale of its movie ticketing business to Zomato.

Paytm Stock Performance: A 2024 Success Story

Paytm's stock performance in 2024 has been nothing short of remarkable. Despite shedding over 7% last year, the stock has surged more than 41% year-to-date, making it one of the standout performers in India’s tech and fintech space.

The November rally alone has seen the stock climb over 16%, continuing its upward trend from earlier months:

• October: 10.3% gain
• September: 10.6% gain
• August: 25.8% gain
• July: 23% gain
• June: 11.4% gain

On November 22, Paytm’s stock hit ₹897.90, marking a 6.2% intra-day jump.

Target Price and Market Outlook

Bernstein’s upgraded target price of ₹1,000 per share reflects confidence in Paytm’s ability to leverage its strengths in lending, payment margins, and regulatory shifts. If the company can execute its strategies effectively, the bull-case scenario suggests a promising future.

However, the path forward is not without challenges. Regulatory complexities and market competition will play a critical role in shaping Paytm’s long-term performance.