Paytm stock: Will it rebound from its recent lows? – Analysis by Investing.com

Paytm stock: Will it rebound from its recent lows? – Analysis by Investing.com

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The recent performance of Paytm shares has attracted considerable attention. The PAYTM stock price decline of more than 38% in 2024 has investors and analysts assessing whether the stock has reached a potential bottom or whether further fluctuations are on the horizon.

Why Paytm shares are falling

Low investor confidence in One97 Communications Limited, the parent company of digital payments firm Paytm, is based on the headwinds that Paytm’s business has been facing.

One of the important factors impacting its performance was the announcement that the Reserve Bank of India (RBI) had imposed certain restrictions on Paytm Payments Bank. This prevented it from carrying out certain operations following a system audit report and the subsequent compliance validation report from external auditors.

Paytm Payments Bank has been informed that it will no longer be able to accept additional credits into its customer accounts and wallets after March 15, 2024.

However, Paytm recently received some good news. Bloomberg said last week that the company had obtained approval to become a consumer digital payments platform. This should help the company continue most of its activities despite the liquidation of its banking subsidiary.

The publication explains that Paytm has until now operated under a license linked to its subsidiary Paytm Payments Bank, which it does not control but which managed its digital wallets and payment traffic.

However, the bank had to shut down operations after Friday following regulatory orders that forced it to stop accepting new deposits due to continued violation of rules.

Paytm had to get other banks to take over the tasks carried out by its former main partner. A deal struck last month saw the company replace Paytm Payments Bank with Axis as the backbone of its merchant payments settlement business.

Paytm Stock Price Forecast

Analysts weighed in on the February numbers. Brokerage Macquarie said the payments firm faced “an uphill task” to move its customers to other banks before the central bank’s deadline at the end of February.

As a result, they believed Paytm faced a “serious risk of customer exodus”. They also said lending partners may reevaluate their relationships with the company.

JPMorgan downgraded One 97 Communications from neutral to underweight in a note in early February, saying the RBI order “has a significant impact on near-term growth and profitability.”

However, PAYTM rose 5% on Monday after Yes Securities upgraded the stock from Buy to Neutral, increasing the target price to ₹505 per share from ₹350.

The brokerage highlighted a number of key reasons behind the upgrade, such as Paytm’s decreasing dependence on the wallet business for revenue and well-contained customer loss due to a breach of his reputation.

Last month, analysts at Goldman Sachs lowered their price target on PAYTM shares from ₹860 to ₹450, citing “a potential loss of payments market share and a slowdown in short-term lending due to the recent RBI directive”.

“There are still a number of unknowns when assessing the impact on Paytm’s revenue, the most important in our view being whether Paytm will be allowed to migrate UPI credentials to another account just once. banking, a segment that accounts for the majority of the company’s MTUs,” the analysts said.

They see Paytm share price trading between ₹240 and ₹750.

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