STNE - PagSeguro Digital cut to Neutral at NewStreet on lackluster TPV outlook

2023-06-22 08:12:12 ET

PagSeguro Digital ( NYSE: PAGS ) stock slid 3.3% in Thursday premarket trading after NewStreet Research analyst Soomit Datta downgraded the operator of Brazilian digital bank PagBank to Neutral from Buy on a tougher backdrop for total payment volume (TPV).

While Brazil central bank's expected rate cuts are expected to help earnings for both PAGS and peer StoneCo ( STNE ), Datta sees TPV as the overriding factor. He keeps a Neutral rating on STNE.

"Q1 saw weaker TPV growth than expected and indications are this could continue to Q2," Datta said Thursday in a note to clients.

The analyst sees PagBank's micro TPV as "close to flat," likely due to competition from TON and MercadoLibre ( MELI ), which "has been growing its POS business quite aggressively in the region."

Datta trimmed his 2023 revenue estimate for PagSeguro ( PAGS ) to BRL 16.1B (US$3.38B) from BRL 17.2B and GAAP net profit to BRL 1.61B from BRL 1.62B. For 2024, he estimates revenue of BRL 17.7B vs. his previous estimate of BRL 19.3B and net profit of BRL 1.76B compared with his prior estimate of BRL 1.91B.

Datta's Neutral rating contrasts with the SA Quant rating and the average Sell-Side rating , both at Buy.

More on PagSeguro:

• PagSeguro, StoneCo stocks gain after upgrade to Buy at HSBC
• PagSeguro: Valuation Multiple 70% Below 5-Year Average, Focus on Lower Rates in Brazil
• PagSeguro Digital stock skids down 14% after Q1 revenue disappoints

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