PAYTM SHARES DOUBLE IN 4 MONTHS DESPITE REGULATORY TROUBLE. WHAT IS THE ROAD AHEAD?
Paytm shares have surged 116% in the last 4 months, recovering from its May low of Rs 310, after falling sharply from Rs 761 level following RBI restrictions on Paytm Payments Bank.
As the stock fell since the month of February, it experienced various ups and downs with the company reporting a widened loss in its Q4 results, then later laying off employees as part of the company’s restructuring. The company was in headlines on selling its ticketing business to Zomato and also on the reports of SEBI issuing show-cause notices to Vijay Shekhar Sharma, the founder of the company.
Recently, the company has also received an approval from the finance ministry to invest in its payment services business.
“Paytm is the type of stock that you may love it, hate it, but you cannot ignore it. And it is always in the news,” said Dipan Mehta, Director at Elixir Equities.
“Although they take a few knocks, underlying they keep on doing, continuing their good work in terms of increasing the subscriber base, providing more services, focusing on other revenue streams which can grow. So, they are following their path. And one could say that whatever could go wrong has gone wrong with Paytm,” Mehta added.
Citing examples of Zomato and Blinkit, Mehta stated how the investors now prefer differentiated business models that have a clear edge over their competition, classifying Paytm as one of such companies.
“With every passing quarter I think, forget about the fact that they have been hit by regulation and those particular revenue streams may have got impacted, but the core business of payments, of financial, of distribution of financial products, of loan origination, that chugs along, and it grows quarter on quarter, year on year on a healthy growth rate. At the same time, they are very much focused on their costs as well. And at some point of time, this company can come solid into profit,” he said.
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Meanwhile on charts, Paytm has been making higher highs and higher lows on a monthly scale for the last four months and witnessed a decent bounce from Rs 310 to Rs 700 zones.
“On the Monthly it has filled its previous falling window which suggests a short term bullish trend has begun. It formed three large bullish bodied candles on a monthly scale suggesting a new primary bullish stance run has begun. In the Weekly time frame stock has been making higher top - higher bottom with large buying volumes to support the bounce,” said Chandan Taparia, Senior VP, Equity Derivatives & Technicals, Wealth Management at Motilal Oswal.
Overall, the stock has major support at Rs 630 zones to continue the recovery towards Rs 750 and Rs 800 zones as on the daily time frame it has formed a pole and flag pattern, which is a bullish continuation pattern, suggesting the ongoing swings and extension of bounce may continue, Taparia added.
Additionally, if the price sustains above the Rs 700 level, there is potential for further upside towards Rs 850 and Rs 900 in the short term while on the downside, Rs 600 and Rs 550 will act as immediate support levels, providing buying opportunities, according to Mandar Bhojane, Equity Research Analyst at Choice Broking.
“Paytm presents an attractive buying opportunity for those targeting Rs 850 and Rs 900, provided appropriate risk management measures are in place. To manage risk effectively, a stop-loss (SL) at Rs 530 is recommended to protect against any unexpected market reversals,” Bhojane added.
The shares of Paytm were trading 1.5% lower at Rs 661 around 10:30 am on BSE.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)