Updated: Aug 10
Paytm share price has risen by almost 12.5% in the last month. After seeing a massive fall after its IPO, is the share on the verge of a breakout? Should you buy it? What kind of returns can we expect? Let's learn all in this article.
Know the Company
Founded in 2010 as a platform for mobile and DTH recharge, Paytm became the first fintech application to cross 10 crore app downloads in 2017. Since its launch, Paytm has diversified its business from just a recharge platform to payment services, cloud services, and banking services. In 2021, it became the largest ever IPO in the history of Indian stock markets with an IPO size of ₹16,600 crores. However, its shares fell by almost 15 and 25% respectively in the first two days of its listing. From the initial launch price of ₹2080, it fell down to an all-time low of ₹510.
The operating revenue of the company has seen a significant increase of 77% in the last year. At the same time, the expenses of the company have also gone up by around 60%. But, it is a positive sign that the income has increased at a higher rate than the expenses. Saying so, the company is yet to be profitable with a loss of ₹2,336 crores in FY21-22. While the financials of the company still look poor, they have been able to consistently increase its sales figures. Their sales have increased roughly by 46% in the last financial year. The Paytm management has also stated that as per their plans, they might achieve operating profitability by Sept 2023.
Looking at the technicals, the stock has already formed a double bottom formation with a low of almost ₹510, and a clear resistance at the price range of ₹718-722 can also be seen which it failed to breach twice i.e. on 13th April. and 28th June. On 18th July, it maintained to breach it but could not maintain the lead as it fell back but on 1st Aug, it again managed to break the resistance and since then it has been able to maintain a go past it to ₹780 as of drafting this article.
At the moment, it seems like the stock has made a breakout but using the Fibonacci Retracement method, we can see that there is resistance again at ₹855 and if it manages to breach it on the weekly chart, we can set a target of ₹1066 followed by ₹1236. This is almost a 40% return.
This analysis is also in line with JP Morgan's report that was published two months ago where they have given a target of ₹1000 which is very close to my technical analysis of ₹1066. So, yes there is a sign of revival but do keep in mind that the company's ridiculously high valuation with the high inflation environment and the unstable global situation can still haunt it down.
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Note: Stock trading is subject to market risk. This article is for educational purposes and is no piece of recommendation. Please do your due diligence before venturing into the market.
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