BoFA downgrades PB Fintech, Paytm awarded with upgrade; shares react

Shares of new-age fintech companies, Paytm operator One97 Communications and PB Fintech were in focus on June 8 after global research and broking firm Bank of America Securities changed its ratings for the two stocks.

BoFA upgraded its rating for One97 Communications to ‘buy’ while also raising its price target for the stock by nearly 10 percent to Rs 855. The broking firm cited expectations of a strong revenue momentum for the company as the reason behind the upgrade.

The brokerage holds the view that Paytm possesses significant potential for positive operational leverage and sits in a ‘sweet-spot’ due to limited competition. Additionally, BoFA also highlighted other positive factors such as the growth of digitalization driving payments and the company’s robust cash balance.

Shares of One97 Communications also reacted positively to the ratings upgrade and at 12.21 pm, were trading at Rs 769.50 on the NSE, up 5.85 percent from the previous close. The stock also hit an intraday high of Rs 785.95 earlier in the session.

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At a stark contrast, an opposite reaction was seen in the shares of PB Fintech, as BoFA downgraded the stock to ‘underperform’ with a price target of Rs 600. The broking firm is of the view that the improving prospects of the PolicyBazaar operator are already factored in the current valuations.

The firm noted that though the journey towards PB Fintech achieving Rs 1,000 crore in profits is well-known, the company is still facing a slowdown in growth due to a high base. While acknowledging PB Fintech as a good company, the brokerage believes that the market has already factored in the improved profitability metrics to a large extent.

Currently, PB Fintech is trading at a price-to-sales ratio of 6 times for the FY25, while Paytm is at 3 times. Aside from that, BoFA also expressed concerns that increased competition from peers like InsuranceDekho, who recently raised capital, might hinder PB Fintech’s accelerated path towards achieving Rs 1,000 crore in profits.

As a result, shares of PB Fintech slipped in trade and at 12.27 pm, were trading with a cut of 2 percent at Rs 631.50 on the NSE.

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