Paytm’s Remarkable Rebound: Hits Upper Circuit 6 Times in 7 Days, Is it Time to Buy?

Shares of One 97 Communications Ltd, the parent company of Paytm, have seen a remarkable rebound, hitting the upper circuit for the sixth time in seven sessions. This resurgence follows the all-time low of Rs 318.05, prompted by RBI’s restrictions on Paytm Payments Bank. While the recovery is evident, market capitalization remains down 30% from January 31, indicating a cautious market sentiment. This article delves into the recent developments, expert opinions, and the ongoing dynamics of Paytm’s stock.

Key Highlights:

  1. Upper Circuit Rally:
    • Consistent Gains: Paytm’s stock gained 5% and hit the upper circuit on February 26, marking the sixth instance in the past seven sessions.
    • Recovery Trend: The stock has been recuperating from its all-time low, closing at Rs 428.10 on the National Stock Exchange, up 4.99% from the previous close.
  2. Positive Developments:
    • RBI’s Advisory: RBI advised NPCI to examine Paytm’s request to be a third-party application provider (TPAP), potentially ensuring uninterrupted UPI services.
    • Migration Recommendations: To prevent disturbance, RBI suggested seamless migration of ‘@paytm’ handles from Paytm Payments Bank to identified banks if TPAP status is granted.
  3. Market Sentiments and Analyst Views:
    • Market Capitalization and Performance: Despite the recent surge, market capitalization remains 30% down from January 31, and the stock is down 33% for the year-ago period.
    • Analyst Caution: Some analysts express caution, citing existing challenges and recommending a wait-and-watch approach until regulatory issues are fully resolved.
  4. Goldman Sachs Downgrade:
    • Market Share Concerns: Goldman Sachs downgraded Paytm to “neutral” and reduced the target price to Rs 450 from Rs 860, citing potential market share loss in the payments sector.
    • Revenue and EBITDA Adjustments: Analysts at Goldman Sachs adjusted Paytm’s revenue and EBITDA estimates for FY24E-26, anticipating a lending slowdown due to RBI restrictions.
  5. Mixed Analyst Opinions:
    • Divergent Views: While Goldman Sachs downgraded the stock, Bernstein remains bullish. Analysts advise caution and suggest exploring alternative opportunities in the BFSI space.

Expert Opinions: Asutosh Mishra, Head of Research at Ashika Stock Broking, remains cautious about Paytm, emphasizing the availability of more attractive opportunities within the UPI ecosystem and the broader BFSI sector.

Conclusion: Investors are advised to carefully evaluate the ongoing developments and expert opinions before making investment decisions. Paytm’s stock dynamics continue to reflect a nuanced market sentiment, and regulatory clarity is essential for long-term investment strategies.

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