Guggenheim Is Warming Up To The PagSeguro Story

Brazilian payments company PagSeguro Digital Ltd PAGS indicated its intention to continue focusing on growing its merchant base and increasing merchant engagement and retention during its fourth-quarter earnings call. 

The company has a strong product suite to support these strategic priorities, according to Guggenheim.

The Analyst

Guggenheim’s Jeff Cantwell maintains a Neutral rating on PagSeguro Digital.

The Thesis

As of December 2018, 20 percent of active merchants were using at least two of PagSeguro Digital’s products, which suggests a rising level of merchant engagement on the company's platform, Cantwell said in a Monday note. 

The company has also initiated a limited launch of PAGS Capital, which could emerge as an important growth driver in the medium- to-longer term, the analyst said. Its TAM is quite large, and PagSeguro believes its strong online distribution model will significantly boost new merchant adds over time, he said. 

Intensifying competition remains a challenge for PagSeguro Digital and could impact new merchant adds, Cantwell said. 

Guggenheim lowered its 2019 and 2020 estimates for new merchant adds from 1.3 million to around 1 million and from 1.2 million to approximately 830,000, respectively.

Price Action

PagSeguro Digital shares were down 0.15 percent at $27.48 at the time of publication Tuesday.

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