27% profit every 20 days?
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Brazilian payment processor PagSeguro Digital Ltd. (NYSE:PAGS) reported fourth-quarter revenues Friday that had more than doubled, and a nearly fivefold increase in net income.
The Analyst
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Susquehanna Financial Group analyst James Friedman upgraded PagSeguro from Neutral to Positive and increased the price target from $31 to $41.
The Thesis
PagSeguro's Q4 results and incremental observations suggest that its hypergrowth — 50-percent-plus — could be sustainable in the mid-term, Friedman said in a Monday note. Merchant growth and increased sales per merchant offset by modest reduction in the take rate make Brazil one of the most exciting countries for payments, he said.
PagSeguro added 1 million merchants since 2016, with the recent quarterly report suggesting the company is on track to add 2 million more by 2019, according to Susquehanna.
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With more merchants accepting more cards, revenues are on the rise, Friedman said. The analyst forecasts total processing volume growth through 2020, thanks to merchant growth and average TPV per merchant. However, a decline in the take rate from 3.41 percent to 2.42 percent in 2020 is likely to offset transaction revenues, the analyst said.
Citing the company's strong Q4 results, particularly with merchant growth and lower expenses, Susquehanna raised its gross revenues estimates for the period from 2018 through 2020.
The Price Action
Shares of PagSeguro, which debuted on Wall Street Jan. 24, were up about 21 percent until Friday.
At the time of writing, the shares were up nearly 2 percent at $35.95.
Related Links:
Morgan Stanley, BofA Positive On Pagseguro, Brazil's 'Square With A Twist'
What You Need To Know About LitePay
27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.