Paytm Share Price Falls Over 3% After Q2 Results

Digital payment company Paytm recently announced its financial results for the second quarter of fiscal year 2024. After the result stock price declined 3% on Monday. The company reported a consolidated net loss of ₹292 crore, marking a 49% reduction in losses compared to the previous year.

In Q2, Paytm recorded a consolidated net loss of ₹292 crore, while its revenue from operations for the September quarter reached ₹2,519 crore, reflecting a 32% growth compared to ₹1,914 crore reported in the year-ago period. Paytm reported a negative EBITDA of ₹232 crore, which marked an improvement from the ₹538 crore EBITDA loss in the previous year.

BofA Securities

BofA Securities observed that Paytm's Q2 results largely met their revenue estimates, and the company's EBITDA surpassed expectations due to steady growth in payments and credit services. They raised their FY24 and FY25 EPS estimates and maintained a 'Buy' rating with a revised target price of ₹1,165

Goldman Sachs

Goldman Sachs is optimistic about Paytm's earnings and multiples, foreseeing ongoing growth in lending and payments, with strong operating leverage in the business model. The resolution of regulatory issues or the addition of a bank as a lending partner could serve as catalysts for Paytm's stock. Goldman Sachs maintains a 'Buy' rating with an unchanged target price of ₹1,250 per share.

Citi

The company's merchant lending business has demonstrated robust growth and loan performance. Citi raised its Adjusted EBITDA and EBIT estimates for FY25 and FY26 and suggests that it may be a favorable time to consider investing in Paytm and raise the target price to ₹1,300 from ₹1,160 earlier.

Jefferies

Jefferies initiated coverage on Paytm with a 'Buy' rating and cited the company's expanding credit business and ecosystem monetization as reasons for their positive outlook. They anticipate that Paytm will turn profitable within the next four quarters, coupled with strong growth and double-digit EBITDA margins. Jefferies set a target price of ₹1,300 for Paytm shares.

Stock Performance

Over the past month, Paytm's stock price has seen a 10% increase, including today’s dip. Looking back over the past six months, the stock has given a 41% return to its investors. However, since the company's initial listing, Paytm's stock has been nearly 40% down from its listing price. This has led many investors to be cautious and consider the right time to exit their investments.

1.5M New Offline PoS Devices Every Quarter for 18-24 Months

Paytm announced ambitious plans to add around 1.5 million offline point-of-sale (PoS) devices, such as sound boxes and debit card machines, every quarter for the next 18-24 months.

In September 2023, Paytm had a merchant base of approximately 3.8 crore, and the number of merchants subscribing to devices had increased to 92 lakh. This represented a year-on-year (YoY) growth of 44 lakh and a quarter-on-quarter (QoQ) increase of 14 lakh. During the second quarter (Q2), Paytm introduced a range of new devices, including card soundboxes, pocket soundboxes, and music soundboxes.

They also launched a PoS device that accepts cards and UPI payments while serving as a soundbox with audio assistance for payment alerts. These innovations are expected to expand the total addressable market (TAM) and enhance merchant engagement and card acceptance.

The PoS device market is currently dominated by players like Pine Labs, Razorpay, and Paytm. According to RBI data from May 2023, there are approximately 79 lakh PoS devices across India. PhonePe, a competitor, has also entered this market by introducing its own point-of-sale device.