Paytm's Shares Plunge As Brokerage Firm Cuts Target Price

Shares of One97 Communications, the parent entity of online payments platform Paytm plunged on Monday and ended at Rs 1,159, falling 5.89 per cent or Rs 72.60 over the previous close of Rs 1,230, as brokerage firm Macquarie in its report on the company, set the target price for its shares at Rs 900. 

The firm also gave the company and "UnderPerformance" rating.

"Post the various business updates and results, we believe our revenue projections, particularly on the distribution side, is at risk and hence we pare down our revenue CAGR from 26 per cent to 23 per cent for FY21-26E," said Macquarie analysts Suresh Ganapathy and Param Subramanian.

"We are roughly cutting revenue estimates for FY21-26E on an average by 10 per cent every year due to lower distribution and commerce/cloud revenues offset partially by higher payment revenues. We cut our earnings (increase our loss projections) by 16-27 per cent for FY22-25E owing to lower revenues and higher employee and software expenses,” they added.

Macquarie cut the target price sharply by nearly 25 per cent owing to lower target multiple of 11.5x (Price to Sales ratio) (from 13.5x earlier) and lower sales numbers. “We maintain UnderPerformance with a revised target price of Rs 900,” the brokerage firm said.