Paytm shares fell around 3 percent on February 22 after Goldman Sachs put a ‘neutral’ rating on the stock and cut the target price to Rs 450 from Rs 860 per share earlier. This adjustment reflects the potential loss of market share in the payments sector.
Additionally, Goldman Sachs anticipates a slowdown in lending in the near term due to a recent directive from the RBI that put strict restrictions on Paytm Payments Bank (PPBL).
Consequently, analysts at Goldman Sachs have decreased revenue and adjusted EBITDA estimates for FY24E-26 by up to 36 percent and 80 percent, respectively. They now expect FY25 revenues to decline by 21 percent on-year, compared to the previous projection of 16 percent. growth.
Paytm stock took a hit after January 31 when RBI imposed strict restrictions on Paytm Payments Bank Ltd. (PPBL). It has seen a sharp recovery recently, hitting 5 percent upper circuit three days in a row.
While Paytm has recouped some losses to trade 24 percent above the 52-week low of Rs 318 hit on February 16, the fintech stock is still trading 48 percent below the January 31 closing price of Rs 761.20.
The recent surge in Paytm share price can be attributed to factors such as RBI extending the deadline to March 15, positive comments from management, the Enforcement Directorate (ED) finding no violation under the Foreign Exchange Management Act (FEMA), a deal with Axis Bank, and an ‘outperform’ rating by Bernstein.
Jefferies has discontinued its rating on Paytm and has moved it to its list of ‘Non-Rated’ stocks. Meanwhile, Morgan Stanley has maintained an equal-weight rating on the stock with a target price of Rs 555. While several brokerages have downgraded Paytm stock after the RBI action. Bernstein remains bullish on the stock.
“Given the still depressed valuation and the removal of a major regulatory overhang, we see considerable upside and maintain our Outperform rating with a Target Price of Rs 600,” Bernstein said in a report, adding that the regulatory actions are restricted to Paytm Payments Bank (PPBL).
The international brokerage expects Paytm to successfully execute the operational changes required to remove the dependency on PPBL with limited long-term impact on their overall business.
The article originally appeared on Moneycontrol.