January 16, 2024
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UBS initiated coverage of the Paytm stock with a ‘Buy’ rating
Today, UBS initiated coverage of the Paytm stock with a ‘Buy’ rating. Shares of One97 Communications, the parent company of digital payments company Paytm, rose nearly 5 per cent in early trade on Tuesday.
The sharp increase in the company’s share price comes after brokerage firm UBS initiated coverage of the Paytm stock with a ‘Buy’ rating and a target price of Rs 900.
This is the highest level the company’s share price has reached after a steep fall following the company’s announcement of reducing focus on BNPL loans less than Rs 50,000.
UBS expects the digital payments firm to reach earnings before interest, taxes, depreciation, and amortization (EBITDA) break-even in FY25, with operating leverage and lower employee stock option expenses.
The brokerage also noted that the stock has reported positive EBITDA before ESOP for the last four quarters. It also estimates Paytm to hit 20 per cent EBITDA margin by FY28, calling it a “key re-rating” trigger.
It also suggested that Paytm’s regulatory issues concerning consumer lending – a key reason behind the stock’s reduced gains in 2023 – has “passed”.
UBS expects Paytm’s revenue to grow 24 per cent CAGR from FY24-28, driven by core payments business and growing merchant loans.
Meanwhile, LSEG data quoted by news agency Reuters suggests that 9 of 14 analysts covering Paytm have a ‘Buy’ rating on the stock or higher, while five have a ‘hold’ rating.
Quicklinks
- Staffavailable.com
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- AnalysisLibrary.com
- Calls for the Day
