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In today’s article, I shall take another look at Paytm (NS:). This is as in mid-February I had written about the equity having a decline in the coming weeks. This did occur as the stock has reached my given price target. However, unlike my last article, I will not only look at the near-term price target but will also take a look at the medium-term price target.
In my last article, I had stated that I wish the stock was listed in the derivative market as I expected a clean fall from its then price of Rs. 900. My bearish position was against the popular consensus. This is as brokerages such as ICICI, Goldman Sachs (NYSE:), and JPMorgan Chase & Co (NYSE:) had just stated that they consider Paytm a strong buy. JP Morgan expected the equity to reach Rs. 1,850, whilst ICICI Securities Ltd (NS:) expected a rally until Rs. 1,352. Moreover, Goldman Sachs stated, “that the risk-reward is now inclined towards the upside” due to which they gave a price target of Rs. 1,600.
Thus, me saying on the same weekend that I expect the stock to fall to Rs. 790 resulted in me taking in some harsh words on Twitter (NYSE:). Nevertheless, the stock has met my target as it is now trading at Rs. 775 and because of that, I will focus on the equity once again. However, I expect this article to further annoy the stock’s investors. This is as I am severely bearish on the equity as I expect it to have a further decline in the short and medium-term.
The reason for my bearishness stems from the capability of the management plus the stock’s technicals. This is as Paytm is a business that was in the right place at the right time but failed to capitalize on that. I say this as the firm is presently in desperate need of a fresh realignment of resources by an outsider. This is as the management only seems to be patting each other on the back rather than addressing the countless issues facing the business. Thus, due to this, I expect the stock to continue its descent until a fresh perspective is brought in. However, owing to the management’s hubris, I don’t expect this anytime soon.
Coming to the technicals of the equity. In the short term, I expect the stock to have a decline to the support range between Rs. 685 and Rs. 700. But, the chances of that support holding are rather slim. Thus, in my opinion, if any bounce were to occur, it will most likely be a dead cat bounce. I say this as the resistance on the upside is very strong. Therefore, I would suggest you treat any small pullback as an exit opportunity.
On the medium-term front, I see only two quantitative support zones for the equity. The first quantitative support is at Rs. 600. However, I expect that support level to only help the stock form a box range pattern which will help trap bullish investors. This is as the stock’s momentum indicators still show that there is a long way to go. Hence, a break of the support zone at Rs. 600 will cause a fall until the quantitative support zone at Rs. 490. This for me is the medium-term price target for the equity.
Overall, Paytm still has much more of a downside move left owing to the technicals plus the management’s inefficiencies. This is as the stock’s chart patterns on the longer timeframes still show severe weakness. Moreover, on the data front, the stock is standing on quicksand. Therefore, I don’t think traders ought to consider buying any dip as it is a sell-on-rise.
Good luck trading.
Disclaimer: The investments discussed by Sandeep Singh Ahluwalia may not be suitable for all investors. Thus, you must trust your analysis and judgment before making investment decisions. The report provided is for informational purposes only and should not be interpreted as a proposition to buy or sell any securities.
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