Why This dLocal Analyst Is Bullish On Fintech Stock

The driver of Uruguayan fintech company DLocal Ltd's DLO growth is its ability simplify payments by addressing pain points in emerging markets, according to. BofA Securities analyst. 

The dLocal Analyst: Jason Kupferberg initiated coverage of dLocal with a Buy rating and $55 price target. 

The dLocal Takeaways: The company provides its customers with one API that allows them to increase payment authorization rates, reduce fraud and enable alternative payment methods, all while complying with local e-commerce and tax regulations, Kupferberg said in a Monday note. 

Additionally, the payment solutions company shows an attractive blend of organic growth and profitability superior to its industry peers, the analyst said.

By providing global enterprises with a reliable platform to conduct business in emerging markets, dLocal has maintained and attracted new customers to its platform, boasting a best-in-class net revenue retention rate of 159%, he said.

In 2020 alone, dLocal more than doubled its customer base from 152 merchants to 338, all while maintaining profitability, Kupferberg said. 

The BofA analyst said dLocal has an “enviable customer base” composed of high-growth blue-chip companies, such as Amazon, Google, Netflix, Microsoft and Uber.

Coupling dLocal’s high retention rate with its world-class customer base, Kupferberg said he sees tremendous potential for dLocal to gain additional business from current customers by helping them expand to additional emerging markets.

On average, an existing customer uses dLocal’s platform in six of the 29 available countries and utilizes only 44 of the over 600 payment options available on dLocal’s platform, the analyst said. 

Structural tailwinds are propelling dLocal’s business, he said.

These tailwinds include the increase of e-cmmerce sales as a percentage of total global retail sales from 18% in 2020 to 21.8% in 2024; the expansion of dLocal’s total addressable market from $1.2 trillion in 2020 to $3.3 trillion in 2024 in the 29 countries dLocal currently supports; and the expansion of the middle class in emerging markets, which house 85% of the world’s population.

DLO Price Action: Shares of dLocal were up 7.85% to $51.54 at last check Monday.