Shares of One97 Communications, the operator of payments and financial services company Paytm, is set for the best week in four months, as in early February, the stock had posted weekly gains of 24 percent, buoyed by the business performance. Paytm shares surged 5 percent in Friday's opening deals, extending gains for the third straight session after brokerage house BofA Securities upgraded the stock to ‘Buy’ from ‘Neutral’ on the back of strong revenue momentum and operational leverage.
The stock opened at Rs 778 level and went on to hit an intra-day high of Rs 809.90 apiece on the NSE in trade today. At 10:54 am, the scrip was trading 4 percent higher at Rs 803.05 per share.
Paytm shares have surged 12 percent in the last five trading sessions. It traded at its highest level since August 22, 2022. On a year-to-date basis, the stock has surged 51 percent, while it has risen more than 47 percent in the last six months. The stock has bounced back 85 percent from its 52-week low level of Rs 439.6, which it had touched on November 24, 2022.
Analysts at BofA said that Paytm is in a "sweet spot" with limited competition. "In the last six months, the competitive intensity has fallen further with most Fintechs struggling due to funding winter, stricter RBI norms and declining discounts. In the listed space, we consider Paytm as one of the beneficiaries from UPI uptake & potential ONDC traction," it said.
BofA finds Paytm well positioned to continue to dominate the SME merchant landscape where the subscription model via Soundbox is improving merchant stickiness. "We expect Paytm's momentum in BNPL/merchant lending to continue, albeit at a slower pace, leading to 34 percent revenue CAGR from FY23-26," the report stated.
Samir Arora, Founder and Fund Manager of Helios Capital, also believes there is more upside in the Paytm stock.
Key levels to watch
The Paytm stock is in bull mode. The shares continue to show strong momentum with a decent for the third consecutive session with volume participation witnessed and as said earlier has breached above the resistance zone of 743-745 levels, indicating a breakout and has scope for further targets of 840-850 levels in the coming days.
"From here on, one can maintain the support zone of 770-765 levels and with indicators like RSI still having a strong trend has much upside potential to carry on the momentum still further ahead in the coming days. One can maintain a stop loss of 770 from current levels," said Vaishali Parekh, Vice President - Technical Research at Prabhudas Lilladher.
Paytm recently breached the consolidation zone and is trading above its 10-month high levels. "We are expecting Paytm to trade further higher. The stock may test 880 to 950 levels in a short term," said Anuj Gupta of IIFL Securities.
In terms of technicals, the counter is displaying several positive technical indicators that make it attractive for long-term investors.
"It has formed an ascending triangle pattern, which typically suggests a continuation of the uptrend. The breakout from this pattern is accompanied by strong volume, indicating significant buying interest," said Pravesh Gour, Senior Technical Analyst at Swastika Investmart.
"Furthermore, the counter has formed a series of higher highs and higher lows, which is characteristic of an uptrend. This pattern indicates that buyers are willing to pay higher prices for the counter over time," Gaur said.
MACD or moving average convergence divergence is supporting the current strength, whereas the momentum indicator RSI (relative strength index) is also positively poised.
"On the upside, Rs 840 is an immediate hurdle; above this, we can expect a move towards Rs 900. On the downside, a cluster of moving averages at around Rs 730 is a strong demand zone during any correction," the analyst said.
(Edited by : C H Unnikrishnan)
First Published: Jun 9, 2023 11:29 AM IST
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