After Paytm stock plunged 47% year-to-date on concerns about its path to profitability, Goldman sees the stock rising around 58% to Rs.1,100 over the next 12 months.
The target price is still below Paytm’s issue price of Rs 2,150. Compared to the current price, Paytm shares are still down over 67% for those who invested in the IPO.
“We see the business model continuing to show strong traction and consider Paytm to be one of the most compelling growth stories at an attractive price within our internet coverage,” Goldman said in a report.
“While acknowledging that the lock-in expiry (86% of Paytm’s outstanding shares) on November 22 could represent an overhang in the stock, we expect Paytm to deliver c.50% revenue growth over the next few quarters and will continue the transition from what was once a payments-only business to one with a strong financial services portfolio,” it said.
With a rating of 3.6x FY24 EV/Sales, a 30% discount to its Indian internet peer group, the brokerage firm has reiterated its Buy rating on Paytm and placed the stock on the Conviction List.
Goldman’s analysis suggests that the current share price implies, among other things, scenarios such as considered “unlikely and exaggerated”. The brokerage firm’s risk-reward analysis shows 112% up in a bull case versus 12% down in a bear case.
Paytm currently trades at 3.6x FY24 sales, similar to global peers, but at a CY21-24E sales CAGR of 38% versus 29% for the peer group.
“However, for EV/Gross Profit, Paytm is trading at 5.6x FY24 GP at a discount of 11% to peers for 1.3x Gross Profit growth over peers. Even within the Indian internet, Paytm’s growth prospects are similar to its peer group, but the valuation is on the low end,” Goldman said.
Following the report, Paytm shares traded 2 per cent higher at Rs.699.9 BSE in a weak market. Trendlyne data shows that out of the 11 analysts covering the stock, 6 have a buy rating and 3 sell, while the remaining 2 own the stock.
(Disclaimer: Experts’ recommendations, suggestions, views and opinions are their own. These do not represent the views of Economic Times)
https://economictimes.indiatimes.com/markets/stocks/news/paytm-current-share-price-compelling-entry-point-for-goldman-sachs/articleshow/94392648.cms Paytm current share price compelling entry point for Goldman Sachs