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PagSeguro Digital

PagSeguro Digital Ltd. Class A Common Shares

StoneCo

Nu Holdings

Analyst ratings are quantitative and qualitative analysis of a stock by Wall Street stock rating analysts. Stock ratings consist of expected future growth, current stock valuation and macroeconomic trends.

Jorge Kuri's

Brazil-based Pagseguro Digital Ltd (NYSE:<a class="ticker" href="/stock/PAGS#NYSE">PAGS</a>) raised around $2.27 billion in its January initial public offering. The <a href="http://benzinga.com/topic/fintech">fintech company&#39;s</a> business model is similar to that of&nbsp;Square Inc (NYSE:<a class="ticker" href="/stock/SQ#NYSE">SQ</a>) and offers card processing services to smaller merchants that are dependent on Brazi&#39;s biggest banks, <a href="https://www.bloomberg.com/news/articles/2018-01-24/brazil-s-pagseguro-raises-2-3b-in-largest-nyse-ipo-since-snap">Bloomberg said.</a>
<h3>
	The Analysts</h3>
<ul>
	<li>
		Bank of America Merrill Lynch&#39;s Jason Kupferberg initiated coverage of <a href="https://www.benzinga.com/stock/pags">Pagseguro&#39;s stock</a> with a Buy rating and $34 price target.</li>
	<li>
		Morgan Stanley&#39;s Jorge Kuri initiated coverage of Pagseguro&#39;s stock with an Overweight rating and $36 price target.</li>
</ul>
<h3>
	Bank Of America: &#39;Square With A Twist&#39;</h3>
Pagseguro is best described as a Brazil-based version of &quot;Square with a twist,&quot; Kupferberg said in the initiation note. Pagseguro is responsible for legitmizing the micro merchant/small-to-medium size business market in Brazil for payment processing, much like Square has done in the U.S., the analyst said. But Pagseguro&#39;s prepayment business is unique to Brazil and allows merchants to receive installment-based retail transactions on an accelerated basis, he said.&nbsp;
Pagseguro&#39;s prepayment service allows the company to leverage the payment relationship and cross-sell a highly profitable service, the analyst said. The prepayment service is a key driver for earnings growth over time and already accounts for more than 90 percent of current pretax income, Kupferberg said.&nbsp;
Only 28 percent of household consumption in Brazil is conducted with a card, which implies a &quot;significant growth opportunity&quot; for Pagseguro over time, Kupferberg said. While the country continues to recover from a deep recession, the improved macro backdrop could result in improving retail sales trends and new business formations, he said.&nbsp;
Bottom line, Pagseguro&#39;s first-mover advantage in its prepayment service &mdash; coupled with expectations for growth in the SMB market &mdash; creates a &quot;long runway&quot; for the company to add new merchants and deliver earnings growth, according to BofA.&nbsp;
<il>Related Link:</il> <a href="https://www.benzinga.com/fintech/18/02/11210097/how-this-ceo-steered-a-fintech-company-through-the-financial-crisis">How This CEO Steered A Fintech Company Through The Financial Crisis</a>
<h3>
	Morgan Stanley: Two Global Trends</h3>
Pagseguro&#39;s business model targets two powerful global secular trends, electronic payments and e-commerce, Kuri said in the initiation note. Electronic payments account for only 28 percent of transactions, which gives the company a multiyear growth opportunity, the analyst said. And Pagseguro also boasts significant exposure in e-commerce while some of its rivals are more focused on the offline payment processing market.
Over the next three years, Pagseguro should see a payment volume compounded annual growth rate of 40 percent, the analyst said. The strong growth rate projection stems from the fact that Pagseguro is the sole provider of [acquisition] and prepayment service, which allows for high margins and cross-selling opportunities, Kuri said.&nbsp;
A three-year earnings per share CAGR of 43 percent is &quot;by far&quot; the fastest growth rate among all Latin American financial stocks under the analyst&#39;s coverage, he said. In fact, this also places the company among the &quot;top end&quot; of global peers, which makes the stock look attractive, as it is trading at multiples that are roughly in line with the peer group average, Kuri said.&nbsp;
<h3>
	Price Action</h3>
Shares of Pagseguro Digital were trading higher by more than 2 percent Tuesday morning and is higher by 5.5 percent since its January IPO.
<il>Related Link:</il> 
<a href="https://www.benzinga.com/trading-ideas/long-ideas/18/01/11091458/brazil-etf-defiant-in-the-face-of-political-credit-headwinds">Brazil ETF Defiant In The Face Of Political, Credit Headwinds</a>

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Fintech

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PAGS

Morgan Stanley, BofA Positive On Pagseguro, Brazil&#39;s &#39;Square With A Twist&#39;

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