Analyst Neha Agarwala of HSBC maintained a Buy rating on Pagseguro Digital (PAGS – Research Report), with a price target of $14.00.
Neha Agarwala’s Buy rating for Pagseguro Digital is based on a combination of factors. The company has shown an impressive cost discipline, contributing to a 7% quarter-on-quarter earnings accretion. The management’s positive outlook for the fourth quarter of 2023, despite sluggish credit growth, further supports this rating. Pagseguro Digital’s stock is seen as a play on lower rates, and the firm’s target price has been raised to USD14 from USD13.
Continuing, a driving factor for the Buy rating is the company’s effective control on costs, which has remained stable at around 54% of revenue over the past year. Total volumes have also grown by 11% year-on-year due to stronger TPV growth and lower-than-expected financial expenses. The take rate is expected to stabilize in 2024, which should ease the pressure currently experienced from stronger growth in the SMB segment. Lastly, the company’s capital allocation strategy has been deemed commendable, with 81% completion of its previously announced BRL1bn share buyback program.
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Pagseguro Digital (PAGS) Company Description:
PagSeguro Digital Ltd. engages in the provision of financial technology solutions focused on Micro-Merchants, Small Companies and Medium-Sized Companies, or Small Medium Enterprises. Its business model covers the following pillars: Multiple digital payment solutions; In-person payments via POS devices that sell to merchants; Free digital accounts; Issuer of prepaid cards to clients for spending or withdrawing account balances, and Operating as an acquirer. The company was founded on 2006 and is headquartered in Sau Paulo, Brazil.
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