Shares of One97 Communications (Paytm) hit yet another low on Monday, as Macquarie lowered the price target further to ₹900.

The stock plunge to a low of ₹1,151 and currently ruling a tad better at ₹1,158, down 6 per cent on the BSE. Investors who had invested in the IPO at ₹ 2,150, the loss would have been 46 per cent or ₹999 within two months of investments.

‘Revenue risk’

"Post the various business updates and results, we believe our revenue projections, particularly on the distribution side, is at risk and hence we pare down our revenue CAGR from 26 per cent to 23 per cent for FY21-26E," said Macquarie analysts Suresh Ganapathy and Param Subramanian.

“We are roughly cutting revenue estimates for FY21-26E on an average by 10 per cent every year due to lower distribution and commerce/cloud revenues offset partially by higher payment revenues. We cut our earnings (increase our loss projections) by 16-27 per cent for FY22-25E owing to lower revenues and higher employee and software expenses,” they added.

Macquarie cut the target price sharply by nearly 25 per cent owing to lower target multiple of 11.5x (Price to Sales ratio) (from 13.5x earlier) and lower sales numbers. “We maintain UnderPerformance with a revised target price of ₹900”.

JM Fin bearish on One 97 Communications

It may be recalled that JM Financial recently came out with a sell call on One97 Communications with a target price of ₹1,240.

"We initiate coverage on One 97 Communications with a Sell rating and a target price of ₹1,240. Paytm faces stiff challenges in its customer acquisition engine which would slow down its revenue growth in the core payments business while scale-up of its related ecosystem businesses (Commerce, Cloud and Financial Services) leaves much to be desired. In our view, Paytm will need to keep funding its MTU growth and thus the road to profitability largely relies on the growth trajectory of other businesses."