People were afraid to touch the stock when it crashed to 300, not much really has changed in the fundamentals but it’s always instructive to see how sentiments from “will not touch the stock” to “it will be 6-8x”. Only difference is that so called technical charts painted a very bad picture (which is the case during price falls) and now charts look damn good (after 3x move) which they did before the 60% crash earlier this year.
That’s why I love stock market.
Disc- Invested at 320.
The stock is moving up because most of the new age tech stocks (Zomato, Swiggy etc.) have made very nice up-moves.
The fundamental issue I have for this stock is its ability to compete with Phonepay on any of the businesses. People don’t change banks generally because there is a bit of stickiness due to familiarity of branch staff, and the entire lock-in ecosystem of products such as FDs, Income Tax website integration, Salary account, any existing loan account and e-Nachs and so on…
However, its very easy to change an UPI application without much lock-ins and I believe that phonepay/google pay with unlimited capital and no hurry to make profits will eat paytm in the long run. A lot of business/revenue that Paytm does is because of the existence of the legacy Paytm app on a lot of people’s mobile phones (remember Paytm was the first and most popular wallets for a long time). However, everytime people will change phone, the Paytm will lose a fraction of customers. History also attests this fact. Paytm has consistently lost marketshare in almost all of the products it competes in. It has closed many divisions as well.
I believe its going to be very difficult for them to have any edge to maintain a leadership position in any of the product line in the long term and hence I doubt it’s ability to create long term stakeholder value.
PS: This is my personal view and I am very often wrong in my predictions.
Agree. I was just making a point that it’s easy to get carried away when stocks are going up in one direction. If technical charts 1 year ago didn’t predict 70% price fall, then how can they be reliable indicator for future prices if nothing has changed in the business model?
I always thought it was way too overvalued and didn’t understand the comparison with Zomato.
So I bought it at 300 purely on the basis of risk and reward which looked good. But at 1000 the issues of stretched valuations and lack of any clear moat take center stage and should make people cautious of jumping into the stock.
A long read on Paytm selling its stake in PayPay to SoftBank
