DLO - DLocal stock firmly in the green despite downgrade to Hold at HSBC

2023-04-13 12:34:13 ET

DLocal ( NASDAQ: DLO ) stock advanced 4% in Thursday early afternoon trading even after HSBC downgraded shares of the payment processing platform to Hold from Buy after turning in mixed fourth-quarter financial results .

The company's earnings and revenue each fell short of Wall Street expectations, with calls for slower sales growth in the first quarter of 2023.

"The 1Q23e guidance indicates continued pressure on net take rate which is likely to be around 1.6-1.7% (vs 1.7% in 4Q22) and, more concerning, further compression in GPM to around 41-44% (vs 47% in 4Q22)," analyst Neha Agarwala wrote in a note.

While the company has greatly expanded its presence over the last two years, Agarwala continued, "we lack visibility on how the take rates and margins will evolve, particularly in the near term."

The Hold rate diverges from the Quant system's Sell rating and aligns with the average Wall Street analyst rating.

Even with lower margins in the near-term, "we continue to focus on absolute dollar profit growth," DLocal CEO Sebastian Kanovich said during the company's Q4 earnings call , while pointing to strong Y/Y growth in total payment volume.

In March, SA contributor Mike Zaccardi also laid out a Hold thesis for DLO.

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