Zomato, Paytm: What should investors do with new-age stocks? Analysts weigh

Shares of Zomato have soared 57 per cent so far in 2024, but those of Paytm have tumbled 46 per cent

New age companies in focus: The stock performance of new-age companies has been a mixed bag thus far in calendar year 2024 (CY24). Shares of PB Fintech, the parent company of Policybazaar, for instance, have soared 71.2 per cent year-to-date (YTD) till May 20, while those of Zomato have climbed 57.1 per cent. Easy Trip Planners, meanwhile, has seen a modest growth at 12.74 per cent, ACE Equity data shows.

Conversely, Paytm plunged 45.8 per cent during the same period. Similarly, IndiaMart InterMesh, and Nykaa dropped 3.19 per cent and 1.63 per cent, respectively. By comparison, the S&P BSE Sensex recorded a moderate increase of 2.44 per cent during the period.

Analysts view these performances as investors' reaction to company-specific developments, and suggest investors have a stock-specific approach while investing in the pack.

Independent market analyst Ambareesh Baliga said, in the current market scenario, companies that are thriving are backed by strong financial performances.

"PB Fintech leads its segment, reflecting robust numbers as the company maintained its profitability in Q4 after turning profitable in Q3FY24. Easy Trip Planners maintains a robust position with strong figures as its Q3FY24 profit rose 9.6 per cent per cent to Rs 45.7 crore. Meanwhile, Zomato's acquisition of Blinkit has boosted its financials, positioning it well for continued success," he said.

Paytm, and Nykaa, Baliga highlighted, face major hurdles. Paytm saw its stock plummet 8.10 per cent in March and April due to the ban on its Payments Bank. Nykaa, on the other hand, has meagre profit in comparison to its market capitalisation, raising concerns, he said.

Financially, PB Fintech posted a net profit of Rs 60.2 crore in the March quarter of financial year 2023-24 (Q4FY24), relative to a net loss of Rs 9.3 crore posted in Q4FY23.

Zomato, too, continued its profitable streak with a profit after tax (PAT) of Rs 175 crore in Q4FY24, compared to a Rs 188-crore net loss in Q4FY23. This was Zomato's fourth consecutive profitable quarter.

Meanwhile, Paytm's losses widened to Rs 549.6 crore for the quarter ending on March 31 (Q4) in financial year 2023-24 (FY24), the company said Wednesday. In the corresponding period of the last fiscal, Paytm's net loss stood at Rs 219.8 crore. On a quarter-on-quarter basis, Paytm had reported a net loss of Rs 168.4 crore. READ MORE HERE

"We believe new-age companies like Zomato, IndiaMart, Policy Bazaar, had good quarterly updates. As for Paytm, even though the stock price was impacted due to various news flows, we believe the stock is bound to recover from the lows. Continued financial performance and corporate actions would possibly re-rate these companies," said Varun Vijayan, director & head of technology, digital and new-age business at Anand Rathi Investment Banking.

Given this, Baliga advises investors to carefully cherry-pick these 'high-growth-high risk' stocks. "Investors may continue to hold the stocks that are performing well, while others could be bought on dips once there is sustained financial strength. New-age stocks are likely to witness a steep rally from a long-term perspective," he added.

The main thing to keep in mind, Varun Vijayan of Anand Rathi Investment Banking said, is even though we call them new-age companies, all or most of them are in different segments/sectors/horizontals.

"For example, it seems Nykaa's profits are low to command such a high premium, we believe they should be looked at as any other new-age companies which are not profitable. All these companies are an outcome of 'Blitzscaling' - which also means once the scale efficiency kicks in, the profits could go very high, non-linear to its revenues,” he said.