Paytm shares tanks more than 8% after rallying for 4 straight days, after Alibaba sells their stakes.
One 97 Communications, the company that owns Paytm, had a dramatic decline in share price recently, snapping a four-session winning streak. The stock decreased 9.43% from its previous closing of Rs. 712.55 to an intraday low of Rs. 645.35. The shares ultimately closed 8.75% down at Rs 650.20. In the last five days, Paytm has increased by 19.18%.
The firm that provides digital financial services reduced its consolidated net loss from Rs 778.40 crore during the same time last year to Rs 392.40 crore in the third quarter (Q3) that ended in December 2022 (FY23).
Paytm’s operating income increased by roughly 42% to Rs 2,062.20 crore in Q3 FY23 from Rs 1,456.10 crore in the same quarter last year. The stock climbed 46.80% higher from its 52-week low of Rs. 439.60, reached on November 24, 2022, to today’s low of Rs. 645.35. However, the counter traded 33.40% below the Rs 969 high it reached on February 10, 2022. The first public offering (IPO) price of Rs 2,150 led to a significant decline in the share price of Paytm.
Despite this, at least three international brokerages have advised purchasing the stock following Q3 (December 2022) results. On the strength of noticeably better quarterly earnings, Goldman Sachs raised its target price from Rs. 1,120 to Rs. 1,150. It was pointed out that Paytm had generated its first quarterly positive cash EBITDA of Rs 30 crore in Q3 FY23, three quarters earlier than the company’s forecast (of September 2023).
Even Macquarie, notorious for its pessimistic assessments of Paytm’s future, was won over by the quarterly financial report card. Macquarie boosted its target price for the company from Rs 450 to Rs 800 and upgraded it from ‘Underperform’ to ‘Outperform’. “When the stock is priced at Rs 600, their opinion differs from their opinion at Rs 2,150. Paytm has pleasantly surprised on the distribution of financial services income by a significant margin since their last target price decrease and has also managed to limit overall expenditures and charges, analysts at Macquarie said.
The target price set by Citi is Rs 1,061. BofA Securities, meanwhile, still maintains a “Neutral” call on the stock.
Opinion from Technical experts.
According to Osho Krishan, Senior Analyst – Technical & Derivative Research at Angel One, “Rs 570-550 is expected to give a cushion to any hiccup” in terms of levels.
According to AR Ramachandran of Tips2trades, “On the daily charts, the price of Paytm stock was overbought, with firm resistance at Rs 705 in place. Investors should take gains at the current price and hold off on initiating buy positions until there is a decline to Rs. 543-556 in the upcoming weeks with goals of Rs. 705-738.”
When recently checked, the stock was trading above the 5-day, 20-day, 50-day, 100-day, and 200-day moving averages. The 14-day relative strength index (RSI) for the counter was 64.22. A rating below 30 is considered oversold, whereas a value beyond 70 is considered overbought. The price-to-equity (P/E) ratio for the company’s shares is negative (19.76).
According to Trendlyne statistics, the average target price for Paytm is Rs 929.50, indicating a possible upside of 41.25 percent. With a one-year beta of 0.88, the stock has a modest level of volatility.
Meanwhile, companies in the metals, consumer goods, technology, and energy sectors contributed to a decline in Indian market indexes today.
The reverse call of Alibaba from Paytm.
A claim that China’s Alibaba Group had sold all of its shares in the digital payment company brought attention to the stock. Out of its 6.3% interest in Paytm, the China-based firm sold more than 3% in January. Alibaba.com, Singapore E-Commerce Pvt. Ltd. sold a 3% interest for Rs 1,031 crore in January. On a recent note, the business mopped Rs 1,378 crore by selling a 3.3% interest in One97 Communications.
Alibaba has been selling shares in publicly traded new-age technology businesses in India as the value of its investments has been rapidly declining. Earlier in November, the Chinese multinational sold a 3% share of online meal delivery aggregator Zomato.
The last call.
The retail IPO investors were completely duped by the firm management and the anchor investors; where is the stratospheric share price that was promised? To encourage this sort of dumping, brokerages appear to keep offering purchase recommendations for these loss-generating enterprises, and ultimately, ordinary investors wind up owning the monkey. We hope the truth comes out soon without hurting individual investors’ wallets.
Paytm shares have not returned to the IPO price range despite sporadic increases. For new-age enterprises, one shouldn’t base decisions on outcomes from a single quarter. Instead, consider the figures for at least a few quarters before forming an opinion.
Edited by Prakriti Arora
