Paytm stock soars to a 52-week high as UBS revises target price to ₹1,000

Shares of Paytm, owned by One 97 Communications, witnessed a significant surge on Thursday, November 28, 2024. The stock soared 2.60% to hit a fresh 52-week high of ₹942.55, following an upgrade in its target price by UBS. This development has sparked interest among investors keen on share market investment opportunities.

UBS revises target price to ₹1,000

UBS, a leading global financial services firm, has raised its target price for Paytm shares to ₹1,000, marking a substantial increase from its earlier projection of ₹490. This revised target represents an 8.85% upside from the previous day's closing price of ₹918.65.

Despite the optimistic revision, UBS maintained a 'Neutral' rating for the stock. The firm highlighted that future growth would hinge on revenue expansion, as most cost optimisation measures have already been implemented.

Sharp re-rating after regulatory challenges

Paytm's stock has experienced a sharp re-rating this year, attributed to the resolution of regulatory challenges. Earlier in 2024, the company faced scrutiny from the Reserve Bank of India (RBI) regarding compliance with data protection and risk management standards.

In January, the RBI imposed restrictions on Paytm Payments Bank, citing deficiencies in risk management and adherence to data protection regulations. Following improvements in these areas, investor confidence has returned, bolstering the stock's performance in the share market investment arena.

Paytm's financial performance: Q2FY25 results

Paytm’s financial results for Q2FY25 showcased robust growth. The company reported a consolidated net profit of ₹930 crore, a dramatic increase from ₹290 crore in Q2FY24. This surge was driven by a one-time gain of ₹1,345 crore from the sale of its movie ticketing business to Zomato.

However, revenue from operations for Q2FY25 stood at ₹1,659 crore, reflecting a 34% year-on-year decline from ₹2,518 crore in the same period last year. Despite this, the company's Gross Merchandise Value (GMV) grew by 5% sequentially, indicating a positive trend.

Market reaction

At 9:25 AM on November 28, Paytm shares were trading 1.76% higher at ₹934.85 on the BSE. In comparison, the BSE Sensex was trading marginally lower by 0.03% at 80,211.91 points.

UBS’s outlook for Paytm

UBS projects that Paytm’s revenue for FY26 will align with its FY24 levels, with adjusted EBITDA expected to break even by Q4FY25. While the firm acknowledged the resolution of earlier challenges, it emphasised that future growth would depend on expanding revenue streams.