Paytm's parent company, One97 Communications, has reported a net profit of ₹123 crore in the first quarter of FY2025-26. This profit is particularly significant as it marks the first time the company has been profitable in a quarter since its listing. In the same quarter a year ago, the company had incurred a loss of ₹839 crore.
However, surprisingly, Paytm's shares fell by 3 percent in the stock market the day after the company's results were announced. Investors are puzzled by this decline, as it was expected that the company's shares would rise following the news of the profit.
Improvement Seen at the Operating Level Too
In this quarter, Paytm's EBITDA, or operating profit, stood at ₹72 crore. In contrast, the company had been operating at a loss in the previous two quarters. This indicates the company's strengthening position. Furthermore, Paytm's total revenue was ₹1917.5 crore, which is 28 percent higher than the previous year.
Brokerage Firms Seem to be Shifting Stance
Following the release of the company's results, several global brokerage houses have changed their stance on Paytm. Jefferies has expressed confidence in the company, upgrading its rating to 'Buy' and setting a target price of ₹1250. According to them, there is still potential for Paytm's shares to rise by approximately 19 percent, as Paytm's stock price was ₹1051 at the close of the market on Monday.
Impressive Growth in a Year
Looking at the past year, Paytm's shares have made a remarkable jump of nearly 132 percent. Investors who were already involved have received significant returns. Based on this confidence, brokerage firms like Bernstein have also adopted a positive outlook on Paytm. They have set a target of ₹1100, giving it an 'Outperform' rating.
Not Everyone Agrees
However, not every brokerage firm holds the same view on Paytm. Macquarie has taken a contrary stance. Macquarie has set a target price of ₹760 for Paytm and placed it in the 'Underperform' category. This suggests that, according to them, Paytm's share price may fall below its current level.
What Could Be the Reason for the Share Price Decline?
Despite the profit, the improvement at the operating level, and brokerage houses becoming positive, the share price still fell — this question is on every investor's mind. Market experts believe that sometimes the increase in share prices is already factored into expectations, which is referred to as being 'priced in.' This means the expectation of profit was already included in the share price. When the results came out, investors began profit-taking, causing the share price to fall.
On the other hand, some investors are also concerned about how b the company's growth track will remain in the future. Profit has been achieved in one quarter, but the challenge of remaining consistently profitable is significant. Additionally, some past restrictions imposed on Paytm's Payment Bank also affect investors' sentiment.
Signs of Recovery Seen
However, after the decline, a slight recovery was also observed in Paytm's shares. The stock recovered somewhat after noon. This also made it clear that the market is not entirely negative, but rather that investors are cautious.
Investors Now Focused on Future Trends
The real question for investors now is whether Paytm will be able to stay on the path to profitability, or whether this was just a one-quarter phenomenon. The mixed opinions of brokerage firms further complicate this matter. Some consider it a long-term player, while others still advise caution.
