Macquarie Downgrades Paytm Stock To Neutral from Outperform; Here’s Why

Following four months of giving a double upgrade to One 97 communications, the parent company of Paytm service providers, Global brokerage Macquarie’s analyst Suresh Ganapathy downgraded Paytm stock to ‘Neutral’ from ‘Outperform.’

During the month of February, Macquarie double-upgraded Paytm from ‘underperform’ to ‘outperform’. Additionally. it increased its price target from Rs 450 to Rs 800. Nevertheless, Macquarie has kept its price target for Paytm at Rs. 800 despite the downgrade to neutral.

In 2023, the stock experienced a sharp run-up that prompted Macquarie to downgrade the stock. Paytm stock has increased by almost 60% so far this year, compared to the Nifty 50’s 3% growth. The shares are still trading well below their IPO price of Rs 2,150 despite this increase. Another major factor in the downgrade is that the brokerage has highlighted future business and reputational risks for Paytm. Additionally, Macquarie anticipates that the volume of the lending business will fluctuate over time.

The stock is currently exposed to two significant overhangs and risk factors that are not favourable. One of the main dangers is that Ant Financial’s desire to sell a 25% stake in the company will probably put the stock under pressure. Any announcement concerning Jio Financial Service made at the Reliance Industries AGM could also pose a risk and serve as a negative catalyst.

One of the initial ratings given to Paytm was an ‘underperform’ rating with a price target of Rs 1,200. Later, the stock was downgraded to Rs 900, Rs 700, and even Rs 450 before being upgraded in February. Ten of the 13 analysts who follow Paytm currently recommend buying the stock, while only three still recommend holding. Even Dolat Capital Markets’ highest price target for the stock, Rs 1,260, is considerably less than the stock’s IPO price of Rs 2,150.

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