UBS upgrades DLocal stock to ‘Neutral’, highlights risk reassessment by Investing.com
On Thursday, UBS analyst Kaio Prato modified the company’s rating on DLocal Limited (NASDAQ:DLO), upgrading the stock from Sell to Neutral. In line with the rating change, the target price was revised down to $9.00 from the previous target of $13.00. The adjustment follows a sharp drop in the company’s stock price and a reassessment of risks and valuations.
The analyst noted that despite continued uncertainty regarding mix and take rates for DLocal’s Total Payment Volume (TPV), current risks appear to be more balanced. This scrutiny comes after the company’s consensus estimates fell 20% following its first quarter 2024 results. DLocal stock has fallen significantly, about 45% since last month’s results were revealed.
The price target drop to $9.00 from $13.00 was attributed to a series of factors affecting DLocal’s financial performance. The company reported an earnings per share (EPS) loss of around 50% in the first quarter of 2024, prompting a re-rating of expectations by UBS. As a result, estimates for the years 2024 to 2028 have been reduced by 21%.
The revised estimates take into account the seller’s renegotiating power, the required investment, and the volatility of certain markets where DLocal operates, particularly Argentina and Nigeria. These elements have contributed to a re-evaluation of the company’s outlook and improved target prices.
DLocal’s recent financial performance and subsequent analyst upgrade to Neutral reflect the company’s current view of the stock’s strength given recent challenges and market conditions. The new target price of $9.00 represents UBS’s revised expectations for the company’s valuation and future performance.
In other recent news, DLocal, the cross-border payments platform, has been the subject of significant investor interest following its mixed Q1 2024 earnings results and a significant reduction in Citi’s target.
The company reported nearly 50% year-over-year growth in total transaction value (TPV), reaching $5.3 billion, primarily driven by increased e-commerce and remittances.
Despite this impressive TPV figure, DLocal’s financial results have been mixed, with revenue growth exceeding 30% year-on-year, but gross profit growth and a decline in adjusted EBITDA.
Citi, in response to these results, lowered their price target on DLocal stock from $17.00 to $10.50, maintaining a neutral rating. The investment bank expressed concern about the company’s performance and outlook, suggesting that DLocal’s annual guidance may be revised in the upcoming second quarter report. Citi analysts noted that DLocal’s current investment could fuel future growth, but currently impacts profitability.
In addition to its earnings results, DLocal announced a $200 million share buyback plan, reflecting confidence in its long-term growth prospects. The company is also considering potential mergers and acquisitions to improve its offering.
Despite the current challenges, DLocal is still focused on diversifying its vendors and reducing reliance on a few large vendors. These are some of the latest developments that investors will continue to monitor.
InvestingPro Insights
As DLocal Limited (NASDAQ:DLO) navigates its recent stock price decline and the market reassesses its risk, real-time data and insights from InvestingPro provide additional context for investors. The company’s market capitalization stands at $2.16 billion, which reflects its current market valuation. Despite recent challenges, DLocal’s revenue growth remains strong, with a 48.8% increase over the past twelve months from Q1 2024, and a quarterly revenue growth of 34.34% in Q1 2024.
The InvestingPro tip highlights that the stock is currently trading near its 52-week low, which could indicate a potential entry point for value investors. In addition, the firm’s strong cash flow, which can adequately cover interest payments, suggests a degree of financial stability during the downturn. For those considering investment, these factors may be particularly relevant.
It is also worth noting that InvestingPro analysts have predicted that the company will be profitable this year, which could be a sign of future growth potential. For readers interested in delving deeper into DLocal’s financial life and future prospects, InvestingPro offers additional tips. By using a coupon code PRONEWS24investors can receive an additional 10% discount on Pro and Pro+ annual or bi-annual subscriptions, access to a wealth of information including 13 additional InvestingPro tips on DLocal.
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