Paytm shares get an upgrade, over 100% price target hike on multiple positive triggers

Global brokerage firm Goldman Sachs has upgraded shares of One97 Communications, the parent company of payments aggregator Paytm to 'Buy' from its earlier rating of 'Neutral.'

Goldman Sachs has also increased its price target on Paytm by more than 100% to ₹1,570 from ₹705 earlier. The revised price target from the brokerage implies a potential upside of 21% from Thursday's closing levels.

The foreign brokerage believes the regulatory environment, which had previously been a key drag on the stock price in past, is incrementally getting better.

This is translating into early signs of recovery in Paytm's payments market share, better earnings visibility, and the relaunch of key products, which should help the company sustain revenue growth of over 20% in the foreseeable future.

Additionally, Goldman Sachs noted potential upside over the next 1-2 years from positive regulatory interventions on payment charges or further market share gains.

The brokerage forecasts that Paytm's EBITDA margins could more than double over the next 3-4 years.

Last month, Axis Capital double-upgraded the stock to 'Buy' from its earlier rating of 'Reduce', and raised its price target to ₹1,500. This is the joint second-highest price target that Paytm has received from analysts tracking it, following Ventura Securities' ₹2,074.

Of the 19 analysts that have coverage on Paytm, 12 of them have a 'Buy' rating, five say 'Hold' and two of them have a 'Sell' rating on the stock.

Shares of Paytm ended 0.51% higher on Thursday at ₹1,293. Despite the upgrade, Goldman Sachs' price target is 27% lower than Paytm's IPO price of ₹2,150, while its current price is 40% below the issue price.