Goldman Sachs analyst Tito Labarta upgraded PagSeguro Digital Ltd PAGS to Neutral from Sell rating at an increased price target of $13.8 (from $7.40).
The analyst expects TPV growth to remain in the low double digits throughout 2024, following its rebound to 11% Y/Y in the third quarter of FY23.
Consequently, the analyst expects revenue growth to improve Q/Q after several quarters of deceleration, while net margin is projected to stabilize (with possible upside) on declining interest rates, leading to lower financial expenses.
Labarta expects the company to grow its overall loan book and deposit base but sees it as relatively more restrictive on unsecured credit.
Moreover, the analyst anticipates PagBank and its competitors’ take rates to still decline more given the easing cycle and the competitive environment in Brazil.
On the other hand, the analyst cites a decline in take rates in light of lower interest rates and the competitive pressure as a matter of concern.
For Brazil Payment Technology sector, the analyst writes that the outlook looks slightly more favorable, thanks to growth seemingly reaching a positive inflection point, which can boost earnings.
Labarta expects fourth quarter FY23 recurring earnings of R$487 million (+10% Q/Q and +18% Y/Y), 5% above consensus, and TPV of R$104.8 billion (+5% Q/Q and +11% Y/Y) to benefit from year-end seasonality. Also, The analyst projects quarterly operating expenses to remain under control at just +2% Q/Q (-4% Y/Y), supporting margin gains (+80bps to 11.7%).
Price Action: PAGS shares are trading higher by 0.95% at $12.72 on the last check Monday.
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