Paytm Stock Rallies on Q1 Profit: Analysts See Pathway to Sustainable Growth

Shares of One97 Communications Ltd., the parent company of digital payments leader Paytm, witnessed a significant uplift today, July 23, 2025, after the company announced its first-ever net profit for the quarter ended June 2025, excluding any one-off gains. This landmark achievement has prompted major brokerage firms to upgrade the stock and revise their price targets upwards.

Leading the charge, Jefferies upgraded Paytm's rating from "hold" to "buy," raising its price target to ₹1,250 from ₹900. The brokerage highlighted encouraging sequential growth in Monthly Transacting Users (MTU) and Gross Merchandise Value (GMV), although it anticipates a slight stabilization in contributing margins over the coming two to three quarters. Jefferies also pointed to Paytm's current valuation being at a discount compared to peers like PB Fintech, expecting compounding-led returns. Potential positive catalysts identified include clarity on the payment aggregator license, a reversion to Buy Now, Pay Later (BNPL) and Wallet services, and the implementation of Merchant Discount Rate (MDR) on UPI transactions.

Citi also maintained its "buy" recommendation, increasing its price target for Paytm to ₹1,215. The firm noted that the earnings beat was primarily driven by enhanced cost efficiencies and better-than-expected benefits from the upfront nature of non-Default Loss Guarantee (DLG) contribution profits. While acknowledging the strong performance of Paytm's merchant business, Citi observed that the consumer business remains somewhat subdued, despite showing signs of recovery.

Bernstein reiterated its "outperform" rating with a price target of ₹1,100 per share, terming the June quarter profit an "important milestone." The brokerage forecasts continued profitability in upcoming quarters, though it emphasized that the sustainability of current profit levels will depend on consistent sequential revenue growth.

However, not all analysts share the same bullish outlook. Macquarie maintained an "underperform" rating on Paytm, setting a price target of ₹760, which suggests a significant potential downside from current levels. The firm noted that while there are levers for future earnings upside, personal loan disbursements remain muted. Similarly, UBS held onto its "neutral" recommendation, describing the quarter as modest for payments and noting flat market shares in GMV. Paytm's management has set a long-term goal of achieving an EBITDA margin of 15% to 20% within the next two to three years.

Out of 19 analysts covering Paytm, 10 currently recommend a "buy," six advise to "hold," and three have a "sell" rating on the stock.

Paytm shares closed strongly on Tuesday, ahead of the results announcement, at ₹1,053.1. The stock has demonstrated a remarkable recovery, having surged over threefold from its all-time low of approximately ₹300, recorded in February 2024.

Key Financial Highlights (Q1 FY26):

♦ Net Profit: ₹122.5 crore (first-ever consolidated net profit without one-offs)

♦ Revenue from Operations: Up 28% YoY to ₹1,917.5 crore

♦ Gross Merchandise Value (GMV): Up 27% YoY to ₹5.39 lakh crore

♦ Merchant Subscriptions: Reached 1.3 crore, an increase of 21 lakh YoY

♦ Financial Services Distribution Revenue: Doubled YoY to ₹561 crore

♦ EBITDA: Profitable at ₹72 crore (margin of 4%)

♦ Cash Balance: ₹12,872 crore

The company attributed its profitability to cost optimization, including a significant reduction in marketing and promotional expenses, and a sharp decline in non-sales employee costs, driven by AI adoption.