Paytm's parent company, One97 Communications, has experienced a surge in its shares following an upgrade from UBS.
The brokerage has more than doubled its target price for Paytm shares, now predicting a potential rise to ₹1000. This adjustment reflects a potential upside of nearly 9% from the closing price recorded on November 27. UBS has maintained a 'neutral' rating on the stock, emphasizing the need to closely monitor the company's business performance.
The brokerage highlighted two critical areas for Paytm to focus on: customer engagement and market share. UBS noted that Paytm's monthly transactional users have decreased by 30% following regulatory intervention by the Reserve Bank of India (RBI). Before the RBI's action, Paytm held a digital payment market share of 24%, which has since fallen to 18.5%. The brokerage's analysis suggests that while the stock has rebounded significantly, the company will need strategic efforts to rebuild its user base and restore its market position.
UBS also mentioned that Paytm's net payment margins have exceeded expectations, indicating positive financial health. The brokerage anticipates that Paytm's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) will break even by the fourth quarter of the 2024-25 fiscal year. Looking ahead, UBS estimates that Paytm's revenue for the fiscal year 2026 will align with the projected figures for fiscal year 2024, pegging it at ₹99 billion.
As of November 28, Paytm shares were trading higher on the National Stock Exchange (NSE), reflecting the market's positive response to UBS's revised outlook. The stock's performance over the past month has been noteworthy, delivering returns to investors while the benchmark Nifty 50 index declined.
The developments surrounding Paytm highlight the challenges and opportunities in the fintech industry, where regulatory actions and market conditions can significantly impact company performance. Paytm's ability to adapt and innovate will be critical in determining its future success in the competitive digital payments landscape.