Paytm is on the cusp of a ‘cup and holder breakout’ — explaining the rally
- The share price of Paytm’s parent company One97 Communications has jumped 24% in the last two weeks.
- The share prices were lingering a little over ₹707 on June 28, about ₹125 higher than its share price on June 13.
- Investors have been advised to only buy Paytm shares when it is available in the ₹680 to ₹700 range.
AdvertisementPaytm investors can finally take a sigh of relief, no matter how brief that might be, as One97 Communications’ share price has been rallying for the last two weeks.
The share price of Paytm’s parent company One97 Communications jumped by 10% since May 30, and 24% in the last two weeks. The share prices were lingering a little over ₹707 on June 28, about ₹125 higher than its share price on June 13.
“Paytm share price has been rising for last two weeks after giving triangular pattern breakout at ₹650 levels. The stock is on cusp of giving cup and holder breakout at ₹720 apiece levels. If Paytm shares today closes above ₹720 today, then we can expect this stock to first hit ₹800 and then ₹940 per share levels,” Ravi Singhal, Vice Chairman at GCL Securities said.
A cup and a holder breakout is a technical term which is used for stocks that resemble the ‘U’ of a cup and a downward drift to the handle. It’s basically a bullish trend where a stock is rising after a dip and could provide exits for those who enter at the right point.
Fundamentals have remain unchanged
A technical bounce back is in progress because its stock fell so much that it has become attractive at the current price point. Investors had been advised to buy Paytm shares when it is available in the ₹680-₹700 range, Singhal said. It has hit this range in the last few weeks,
Meanwhile, Avinash Gorakshkar of Profitmart Securities noted that this is only a technical bounce bank and the fundamentals of the stock are still unchanged.
“Paytm numbers in upcoming quarters are expected to remain on the same line as we witnessed recently. So, this bounce back in Paytm shares has nothing to do with its fundamentals,” he added.
Macquarie believes that profitability is still an uphill battle for Paytm, which may take another 12 quarters — or about three years — to break even. While ICICI Securities expects Paytm to be EBITDA positive by FY25.
Goldman Sachs expects Paytm’s pre-tax profit breakeven to land by September next year. It is, however, buoyed by the company’s improving monetization of the payments vertical and a robust growth in financial services and cloud businesses.
Still at a third of its IPO price
At ₹ 707, Paytm’s shares are still valued at only a third of ₹2,150, the price at which Paytm sold its shares during the initial public offering (IPO). People who invested in Paytm during its IPO are currently incurring a loss of 66% on their investment.
The loss even reached 75%, when Paytm’s share prices touched ₹510.5 in May this year. Overall, the company’s shares have tanked 50% since the beginning of the year.
The data mentioned on Trendlyne shows that the average target price of nine analysts on Paytm is ₹891, which is 26% higher than the current share price.
Source: Brokerage reports
|ICICI Securities||Goldman Sachs|
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