Paytm could be most profitable among internet companies, says Goldman, hikes target price
Paytm to Rs 1,250, signalling a potential upside of about 30% from current levels, global brokerage firm Goldman Sachs said it expects the fintech major to be the most profitable company within the internet sector.
«Paytm’s operating metrics have been surprisingly positive, and we are further raising our FY24-26E EBITDA estimates by 2-5%, with our target price moving to Rs 1,250 (was Rs1,200),» Goldman said, adding that it has a forecast of 30% YoY revenue growth for Paytm in Q2.
Paytm is seen turning net income positive in FY25, which could be a catalyst for the stock. «At 37x FY26 P/E, Paytm trades at a 20%/50% discount to Zomato/Nykaa, which we do not see as justified given Paytm’s growth profile (26% FY23-25E revenue CAGR),» Goldman said.
Besides continued momentum in lending and payments, resolution of outstanding regulatory issues (customer onboarding ban on Paytm Payments Bank or online merchant onboarding ban), and/or inclusion of a bank as a lending partner could act as catalysts for Paytm.
The stock has rallied over 76% so far in the calendar year 2023.
«Investor pushbacks have been around negative impact on Paytm from a potentially adverse credit cycle, and while we expect Paytm to prioritize credit quality over growth, we expect FY25 financial services revenues to still grow 36% YoY (vs 61% in FY24),» Goldman analysts said.
Global brokerage Bernstein recently added Paytm in its list of 12 bottom-up ideas for the rest of the year saying that the company appears to be on the right side of disruption with its dominant payments platform and a head start in digital credit products.
«Its underwriting and collection outcomes are impressive too, but remain untested through a full credit cycle.
