Paytm Shares Surge After Q4 Results. What Should Investors Do?

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Shares of Paytm rose more than 3% to 597 apiece on the BSE in Monday’s early deals even after the digital financial services firm’s consolidated net loss widened to 761 crore during Q4FY22 from 444 crore loss in the year-ago quarter.

Though, Paytm said it is on track to achieve break-even by quarter ending September 2023, which it hopes will be driven by continued revenue growth, along with moderation in costs as operating leverage kicks in.

“We remain conservative and expect the company to be EBITDA-positive by FY25E. Maintain BUY on Paytm shares with an unchanged target price of 1,285 based on customer lifetime value methodology,” said brokerage ICICI Securities.

The digital payment company’s revenue grew 89% to 1,541 crore from 815 crore in the fourth quarter, driven by healthy growth in GMV (gross merchandise value) from MDR bearing instruments, 2.1 million new devices, and huge growth in value of loans disbursed.

One 97 Communications Ltd, which operates under the Paytm brand, said all lending offerings have scaled up significantly over the last year, seeing increased adoption by users and number of loans stood at 6.5 million, rising 374% over last year.

As per another brokerage Yes Securities, Paytm’s business trajectory is admirable but longish runway still remains for bottomline profitability. “We maintain ‘Reduce’ on Paytm with a revised price target of 580 as we value Paytm at 5.5x FY23 P/S, factoring in customer addition embargo and increased regulatory risk,” the brokerage added.

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