Shares of Paytm jumped over 6% to INR 558 on the BSE on Monday (February 6) following the fintech giant’s announcement that it turned EBITDA profitable, before ESOP costs, in Q3 FY23, three quarters ahead of its projections.
During intraday trading, Paytm shares rose as much as 7.8% to INR 566.
On Friday, Paytm reported about a 50% year-on-year (YoY) decline in net loss to INR 392.1 Cr in Q3 FY23, with over a 41% YoY increase in operating revenue to INR 2,062 Cr. On the other hand, it declared achieving its milestone of EBITDA profitability before ESOP cost in the December quarter.
Paytm’s gross merchandise volume (GMV) in the quarter grew to INR 3.5 Lakh Cr and average monthly transacting users rose 32% YoY to 8.49 Cr.
Paytm was one of the worst-performing new-age tech stocks in 2022, falling over 60% during the year. However, the company’s shares are expected to gain momentum after it reached its EBITDA profitability target ahead of its estimates.
Following the results, Goldman Sachs increased its price target (PT) on Paytm to INR 1,150 from INR 1,120 earlier, implying a 106% upside to the stock’s last close. It maintained a “buy” rating on the stock.
Recently, the brokerage had said that Paytm would achieve its profitability target in the March 2023 quarter.
In its latest research report, the brokerage said, “Not only do we expect profits to sustain, but with continued strong traction in disbursals, operating leverage, and UPI reimbursement in Mar ’23, we expect adjusted EBITDA margin to expand to 6% in Mar ‘23.”
Goldman Sachs said that Paytm achieving the milestone of adjusted EBITDA profitability will act as a significant catalyst for the stock and expects it to report net income profitability in FY25.
“Paytm’s valuation multiples are at a discount to global/India peer group, for a growth outlook that is better or in-line with peer group; within our global fintech coverage, we expect Paytm to see the sharpest margin expansion between CY22 and CY23,” the brokerage added.
On the other hand, Citigroup also raised its PT on Paytm to INR 1,061 from INR 1,055 earlier, implying a 90% upside to the stock’s last close.
Citigroup said that the stock is currently trading cheap considering its growth trends and the “solid profitability beat” in the quarter with a potential for a strong profitability trajectory ahead.