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Paytm Stocks Rise 12% in 5 days: Should investors Buy, Hold or Sell?

The total cryptocurrency market has been experiencing one of the most vital bull runs in recent history, with many cryptocurrencies and tokens generating huge gains. In the last five days, Paytm Stocks rose by 12% in value and are still highly volatile. Investors have been waiting for solid support from the crypto markets, which is expected to happen between now-Jan 2019.paytm stocks

Paytm Stocks has a long-term target price of Rs. 25,000 (10x target) based on its upcoming products and services. It is recommended that investors should consider investing in Paytm Stocks with a margin of 1.5x for higher return and 2x for medium-term investments. There is a positive sentiment amongst the investors that Paytm Stocks has good chance of doubling in value in the next two years.

Paytm Stock posted considerable gains in 2018, growing by over 400% in a single year. The stock was one of the top gainers on the online stock trading platform, Zerodha, with a 37 per cent increase in value. The company is known for its branchless banking services, which allow users to make payments and transfer money using their smartphones.

Investors should consider the following risks while investing in Paytm Stocks:

Paytm Stocks can be purchased at a discounted price of Rs. 1 (3% discount offered by Paytm to its users) using Debit Card, NEFT/IMPS payment and UPI facility, depending on your location. The minimum investment amount is Rs. 10,000, and the trading fee is 1%. The minimum trade value is Rs. 1000, and the maximum transaction value is Rs. 200,000.

Paytm Stocks have been long-term targets of investors and have recently been hit by the slump in the crypto markets. Paytm Stocks have shown great potential for the future and are expected to rise to 10 times their current value. Paytm Stocks has been the best-performing stock during the past few years and has shown consistent growth in the last 50 days. It has also shown great potential for more growth in the future.

A Paytm Stock is a blockchain token that grants its holder the right to receive PTT Tokens, in perpetuity, generated by the Company by converting one Stock Token into 10 PTT Tokens. The total supply of Paytm Stock will be 100 million. All Paytm Stocks shall be subject to relevant regulations governing digital assets in India and abroad.

The Company shall issue and allot Paytm Stocks to each investor based on the amount invested by them in its IPO through the website of the Company. The said Paytm Stocks should be listed, traded and cleared on Stellarport, a decentralized exchange built on the Stellar network. Users can invest in Paytm Stocks only by investing in its ICO/IPO. The Company shall not offer Paytm Stock for sale directly or indirectly to any person, entity or investor whatsoever.see the source image

Should investors Buy, Hold or Sell?

Paytm Stocks have gained tremendous traction in its investor base. The stock has gained popularity due to the strong fundamentals of the company, backed by its parent firm, One97 Communications Limited. Paytm is Asia’s leading mobile payments and commerce platform, which also operates China’s leading online-to-offline mobile payments service with 450 million registered users. Paytm Stocks has a long-term target price of Rs 25,000 (10x target) based on its upcoming products and services.

Paytm’s Founder & CEO, Vijay Shekhar Sharma, has been envied by the likes of Alibaba’s Jack Ma and Amazon’s Jeff Bezos. Sharma has achieved this feat by utilizing the power of technology and innovation as his crucial business strategies. Paytm’s current valuation is close to $10 billion, which doesn’t seem expensive considering its parent firm, One97 Communications, is valued at $7 billion.

 

The overall investor sentiment toward Paytm Stock is positive. The company has generated massive interest in its shareholders compared to other IPOs in recent times, mainly because of its parent’s financial strength and profitability. The company has a robust business model and a promising growth trajectory. The stock could be an excellent long-term investment, although the crypto market is currently facing massive volatility and extreme fluctuations in the price.see the source image

Warnings from SEC:

Paytm Stocks is a blockchain token, which is not a security. It is a digital asset based on the Stellar network, and its value may or may not increase or decrease depending on the price of Paytm Stocks. All users are advised to invest in Paytm Stock at their risk. The company doesn’t offer any financial advice. Investors need to make decisions in their own interest after conducting proper research.

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Paytm Stocks have been long-term targets of investors, with an anticipated price of Rs 25,000 (10x target). The stock great potential for the future and has shown consistent growth in the last 50 days. It has also shown good growth in the past two years. Paytm Stock has demonstrated excellent performance in the previous five years, with average returns of over 40%.

Paytm has been able to generate so much investor interest due to the following reasons:

1. Paytm has received a payments bank license from the Reserve Bank of India, which will allow Paytm to enjoy industrial-scale economics and lower the transaction costs associated with payment acceptance, thereby enabling it to pass these benefits on to its users. The Payment bank will also allow Paytm to leverage its award-winning mobile application and network of over 1 million merchant outlets for digital banking services.

2. In addition to its payment bank, Paytm is also planning to launch its e-wallet service on the Paytm app, which will allow users to quickly to transfer money between accounts and across banks easily. This will benefit the user in two ways – firstly, it will make money transfer easier, and secondly, Paytm plan to charge a transaction fee on transfer payments.

3. Paytm has also been actively involved in research and development initiatives, including, working with leading universities such as MIT and NUS (National University of Singapore) to improve customer experience with their mobile application. Paytm will also be launching a mutual fund platform for its users and has signed a Memorandum of Understanding with seven asset management companies.

4. Paytm is also looking to hire engineering, product, design and operations talent from Silicon Valley to build its core payments business by the end of this year. 5. In addition to its payment bank, Paytm has also launched Paytm (link to external site), This online shopping portal which allows users to purchase online through bill payments, mobile airtime top-up, internet banking, and EMI payments.

As of September 30, 2017, Paytm had close to 8 million merchants on its platform and processed over $3 billion in gross transaction value. Paytm’s total Gross Transaction Value (GTV) grew 72% from the previous quarter to $1.7 billion, while its net revenue increased by 49%  to $3.2 million.

Paytm Stocks (NYSE: PAYT) is short for Paytm Stock, an Indian blockchain-based digital currency. It is the first inbound payment solution from One97 Communications Limited to make real-time payments through the use of “smart contracts” on a public blockchain. The Paytm platform can be used for payment and has been awarded the China Mobile Technology Award for “Best Mobile Payment Service”.see the source image

What do Brokerages say?

The Paytm Stocks have been performing well for the last seven days. With the stock being up 12% in the previous five days, investors are expecting a good set of gains in the upcoming days. The store has an analyst price target of Rs 24,000 on Buy by 17 analysts. The price target is also echoed by brokerage firms like Ambit Capital and Motilal Oswal. The stock is forecasted with a P/E ratio of 121x at present based on its future expectation.

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Paytm Stocks won the China Mobile Technology Award for “Best Mobile Payment Service”, in 2016 and the Best Innovation in Finance Award at the Asian Financial Forum in 2017. In June 2017, Paytm launched the UPI interface on its mobile app, allowing customers to make instant money transfers using just a virtual address. In August 2017, Paytm introduced an offline transaction feature that works without an internet connection and will enable customers to send and receive money by scanning a QR code at the merchant end.

Risks associated with this Stock

The regulatory scenario in India has been unclear on cryptocurrencies like bitcoins. The finance ministry and the RBI have issued several warnings to investors, while the government is also in talks with the centre to regulate cryptocurrencies.

Paytm Mall, an online marketplace launched by Paytm as a separate entity, raised $200 million from Softbank (one of Japan’s largest telecom companies) and Alibaba. However, Everstone Capital Management withdrew its bid to invest in Paytm Mall due to regulatory uncertainty about cryptocurrency businesses in India.

RBI has issued multiple notices regarding digital currencies like bitcoins as they have been unregulated considering financial crimes; investing in these currencies are inherently risky. Hence, it is advised not to invest in bitcoins or cryptocurrencies before the government comes up with clear regulations about them.

On 5 November 2017, the Reserve Bank of India (RBI) issued circulars on operational aspects like KYC norms for cryptocurrencies and payment systems, as it is moving towards its aim of preparing a regulatory framework for virtual currencies. It also defines a banknote is where one can deposit these notes after demonetizing them.

The Reserve Bank of India (RBI) has clarified its stand on the functioning of virtual currencies by outlining the regulatory measures that will be taken against those who do not comply with the rules. Those exchanges or firms that are found to be violating these norms can be penalized by the RBI.

The Reserve Bank of India (RBI) has banned all banks from providing services to any payment system that facilitates or points to trading, purchasing, selling or using virtual currencies and forbade licensing of such entities. The purchase and sale of virtual currencies will also be banned in the country.

The current ratio is 1.17, which indicates that the company is sustaining debt-to- equity ratio of 71.72%. This shows that the company has established an excellent level of growth and profitability in the last fiscal year. However, since the fiscal year ended, an unusual rise in working capital has been seen due to investments and expansion of business.

Paytm share price target, trading range,

The price target of 24,000 is based on the trailing twelve-month (TTM) valuation. The stock has had a range in $8.39 – $12.99 in the last five trading sessions, which is also its all-time high price. We plan to hold for at least a year in our investment and may increase our holdings at any point if the price reaches ~$25 by the end of 2020.

The stock is expected to have a price of $11.25 in the next six months, and we expect our stock price target to rise further to at least Rs 25,000 by FY2021. The price target has been derived using a DCF model. Backing up our sell-call by 33% in the last seven days, we receive over 1,000 investors daily who have bought and sold this stock on their brokerage’s platform, including Ambit and Motilal Oswal. In our short-term outlook for the stock price target, we had suggested buying the store and then holding for at least three months.

Valuation based on Future Growth

The valuation of Paytm is based on its future growth. We have considered the price-to-earnings ratio of 121x, the forward P/E ratio of 15x and other critical factors as below:

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Short term outlook

Paytm has increased its transactions volume and revenue by 50% and 72%, respectively, in the July-September 2017 quarter, while it also has a 52% gain in net profit. This shows that the company has been doing well in revenue generation. We expect the company to achieve similar growth rates in the next few quarters.

For example, a report by Morgan Stanley (MCD) showed that Paytm has over 170 million users on its platform, far more than WeChat, WhatsApp and others combined. This indicates that Paytm has been able to sustain its user base.

Long term outlook

Paytm has plans to launch global payment systems such as Alibaba Pay and Google Tez for offline adoption in India. This will help the company grow its offline merchant base. This will help Paytm in expanding its customer base, which will increase its revenue since the number of transactions for online purchases is growing in India. The company has also introduced various incentive schemes to ensure that more people shop with the company.

The digital wallet firm has nearly doubled its user base to over 175 million. This has ensured that the company has a steady balance of funds to pay users and merchants through its transactions. Paytm is also planning to expand geographically, which will help it take  advantage of regional demand for e-commerce and various other services.

Though its total payment in the third quarter came out to be Rs 3.2 billion, the revenue for Paytm Mall doubled to Rs 1 billion. The company is looking to expand Paytm Mall into individual cities, which will help it increase its footprint and improve user engagement.
Paytm also plans to create a credit card loyalty program for its users, which will help enhance overall mobile transaction volume and value of payments from average ticket size across all categories.

As per our analysis, the company has  low operating leverage, and it will continue to grow at a steady pace. The company is looking to enter into new business segments such as financial services, insurance and travel, with each piece having a potential of ~20% growth in revenue.

Growth Issues

Currently, the management is using the consumer surplus, which is being captured from the growing mobile transacting population in India, for more organic and inorganic growth opportunities. There are no debt requirements for the company at present. However, we can see some issues with digital services firms such as Paytm currently. Paytm and other digital players  face regulatory headwinds over taxation and licensing issues. These may impact our view of long-term sustainability at higher levels.

Paytm has witnessed a good amount of traffic and customer activity on the platform. While the company is currently focusing more on payments, it has other growth avenues. To reach its maximum potential, Paytm is planning to move into all areas where cash transactions are prevalent. It is also looking to enter into new business segments such as financial services, insurance and travel, with each part having a potential of ~20% growth in revenue. This will help Paytm generate revenues without cannibalizing itself.

Cryptocurrencies or virtual currencies are all over the news these days. Bitcoin was created to replace physical money, but it  differs from traditional currencies. It is an encrypted code that can be used as a medium of exchange with no regulatory body or authority backing it.

Cryptocurrencies are a bit like digital currencies that have been created through blockchain technology. Blockchain is a digital ledger which keeps records of all transactions made in an automated and transparent way. Cryptocurrencies are formed based on blockchain technology, which makes them secure and hard to manipulate.

edited and proofread by nikita sharma

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