NEW DELHI: Paytm stock, which has seen its value fall by over Rs 830 a piece since it had a disappointing listing November last year, may rally 40% from Tuesday’s intraday low, according to global brokerage and research firm JP Morgan.
On Tuesday, share of One97 Communications (Paytm), closed 1.59% lower at Rs 1,318 after touching intraday low of Rs 1,313. Commencing coverage of Paytm with an ‘overweight’ rating, analysts at JP Morgan expect Paytm stock to reach the target price of Rs 1,850 per share by March 2023. Even if the scrip reaches to that level, which few other brokerages feel it won’t, the set target would still be much lower than the IPO price of Rs 2,150 per share.
This is the second time when a global brokerage firm has given a bullish view on Paytm. Earlier in December, Morgan Stanley had set a target price of Rs 1,875 on the stock. Both JP Morgan and Morgan Stanley were the book running lead managers of the Paytm initial public offering. Earlier, Macquarie Research reduced its target price to Rs 1,200 a share, down 40% from its issue price of Rs 2,150. JM Financial had given target price of Rs 1,240 later in November.
Analysts at JP Morgan, however, say that Paytm’s adjusted EV (enterprise value)/sales at 6x looks cheap to them. The brokerage also expects cash break-even by FY25 for Paytm and further estimates it to be profitable from FY 26.
“On our estimates, Paytm will burn through $400 million in cash before turning cash positive. This can be easily funded by $1.5 billion in cash balances on book and stake in PayPay, in our view,” the brokerage said in a report. Paytm has a 7% stake in the Japanese firm PayPay. This, according to JP Morgan, translates to a $750 million value to Paytm.
CLSA downgrades Tata Motors
Brokerage firm CLSA has downgraded auto major Tata Motors from Buy to Sell rating and reduced its target on the auto stock to Rs 408 per share from Rs 450 earlier. “This is premised on a lower valuation for its domestic passenger vehicle (PV) business, below the recent valuation ascribed to it by a private equity fund, and on a lower valuation for Jaguar Land Rover (JLR) due to its slower electric vehicle (EV) ramp-up versus competitors,” said CLSA. It added, “Our valuation is based on Rs 150/share for its CV business, Rs 151/share for JLR and Rs 99 per share for its domestic PV business,” CLSA added. Following the downgrade, shares of Tata Motors fell 1.61% to close Tuesday session at Rs 489.75 on the BSE.