PagSeguro Analyst Lowers Estimates After Re-evaluating Macro & Industry Drivers

  • KeyBanc analyst Josh Beck remained Sectorweight on PagSeguro Digital Ltd PAGS.
  • Beck updated CY23 estimates for PAGS as the analyst further evaluated macroeconomic trends and company-specific drivers. 
  • Beck took his TPV estimate lower primarily on headwinds related to consumer spending versus CY22. 
  • Active merchants are taken lower due to continued net churn relating to the micro-merchant base, though they have minimal impact on the analyst's TPV revision. 
  • Beck's revenue estimate moves lower as a result of TPV changes. 
  • The analyst also took financial expenses higher to reflect the higher rate environment better. 
  • Lower net income comes as a result of the above estimate changes.
  • Beck's CY22 estimates were essentially unchanged.
  • PagSeguro operates in the desirable Brazilian market, which is ~30% penetrated. 
  • With a brand boost from parent UOL, PagSeguro has crafted a disruptive model and added over ~5 million active merchants to its platform. 
  • The narrative around the consumer-focused PagBank digital account could develop similarly to other successful FinApps like Block, Inc SQ Cash App or PayPal Holdings, Inc PYPL Venmo. 
  • The PagBank FinApp meets the needs of ~90 million underserved consumers in Brazil, and early data suggests a strong PMF with a top 10 financial service app store ranking despite a launch. 
  • While remaining constructive on PagBank's potential, the analyst recommends Sector Weight positions looking for increased visibility into scaling efforts.
  • Price Action: PAGS shares traded higher by 1.1% at $7.78 on the last check Monday.
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