StoneCo reported Q1s after close. Having recently updated its accounting for membership fees (negatively affecting revenue and down through the P&L) consensus was, according to IR, a mix of old and new – and not so helpful therefore.
Having cut to Neutral in Jan-24 after the stock’s strong run into year-end, following strong Q4s (beating at vols, revenue and net income by 4-6%), setting a reassuring 1-year guide (annual guidance for the first time) and following a recent company meeting, we upgrade revenue, gross profit and, ultimately, net income for FY 25-26 by ~ 20%, supported by better market dynamics.
With Banco do Brasil and Bradesco set to take Cielo private (tender launched Feb 5), potentially in time trying to emulate renewed commercial efforts from Itau, the market is concerned that StoneCo, more exposed to the higher-end SME segment, and PagSeguro (to a lesser degree) could be caught in the cross fire.
Since the market lows and the sharp contraction in local bond yields at the end of October last year, the Brazilian PayCo stocks have almost doubled. Further rate cuts (including last night's 50 bps) and better TPV dynamics look to be built into expectations now and, to move the stocks on, we need to see delivery of “Payments Plus” and principally a growing an.d profitable Credit business, as outlined at StoneCo’s in depth investor day in November last year
In this product we rank the most positive and negative domestic stocks, filter the symbols by market-cap and trading volume, and then divide the companies into sectors and groups. We then manually look through charts leadership/changes, bottoms-up/top-down ideas, short-term patterns that may have long-term significance, etc. We believe you will find this product valuable as significant price and relative moves begin in the daily charts.
Brazil’s Pix is the fastest adopted payment system globally and its Nov 2020 launch was nothing short of revolutionary, practically making cash a thing of the past. By contrast, Japan’s road to a cashless society has been a more winding one. In this article, which considers Japan’s approach in a global context, Lindsay Whipp contrasts the two governments’ top-down strategies for promoting digital payment.
According to Valor, the Central Bank on Monday in meeting with industry representatives to discuss revolving credit card fees, raised the idea of limiting instalments to x12 (from 18), capping credit card interchange and lowering revolving rates. At the heart of the debate is economic profit generated by higher risk customers who ultimately “shouldn’t” be extended credit (revolvers unable to repay debt).
Rate cuts are up and running in Brazil and the Payment companies are heavily geared in on the upside. The market is anticipating a further downward revision to SELIC next Weds (Sept 20th). Furthermore, Q2 is likely to prove the trough quarter for market TPV with volumes, most notably at Pagbank (formerly PagSeguro), set to accelerate in H2.
Pagbank (PagSeguro) reported Q2s after close, missing at TPV and revenue (again) but managing to make net income given a better funding mix and a sharp reduction in credit provisions (which won’t be sustained at this level we assume). With SELIC cuts now coming through, it’s this top line trend (revenue down 2% y/y) - as PagSeguro chases a different merchant mix - which is likely to continue to prevent stock outperformance: whilst TPV looks to be improving in Q3 a touch, management suggested tak...
Pagbank (PagSeguro) reported Q2s after close, missing at TPV and revenue (again) but managing to make net income given a better funding mix and a sharp reduction in credit provisions (which won’t be sustained at this level we assume).
BAH, HURN, NOTV, PAGS, SPOK, ROKU, BZH, HOV, MTH, SKX, SAM, DESP, BJRI, RKLB, IONQ, KLAC, INTC, CNX, CLB, CRK, OVV, SOFI, TROW, AX, CINF, DLR, ABR, RWT, BFST, INBK, AUPH, BBIO, DSGN, RPHM, URGN, RCEL, AXNX, CUTR, PLSE, In this product we rank the most positive and negative domestic stocks, filter the symbols by market-cap and trading volume, and then divide the companies into sectors and groups. We then manually look through charts leadership/changes, bottoms-up/top-down ideas, short-term patte...
Despite the Central Bank holding steady last night (keeping SELIC at 13.75%, largely as expected) the downward path for rates in Brazil is clear – and has supported a 50-75% move up in the equities this year for Pagbank (formerly “PagSeguro”) and for StoneCo.
ABECS released Q1 market TPV growth for Brazil at the end of last week. Growth of 10.7% y/y was a touch lower than the prior quarter (11.8%) but, following weak TPV reported by Cielo recently, will calm fears of broader market weakness. On the contrary, Cielo’s behaviour is more rational, re-pricing part of its book in March, and we continue to see a more benign payments market in Brazil, as well as share gains coming through for PagSeguro and StoneCo. Ahead of StoneCo's results on Weds (5/17) w...
In this product we rank the most positive and negative domestic stocks, filter the symbols by market-cap and trading volume, and then divide the companies into sectors and groups. We then manually look through charts leadership/changes, bottoms-up/top-down ideas, short-term patterns that may have long-term significance, etc. We believe you will find this product valuable as significant price and relative moves begin in the daily charts.
March inflation in Brazil of 4.65% y/y, published this week and coming in below expectations, should be taken well in the beaten up regional Fintech space – most notably for the Payment companies. Our focus in this note is, however, more on the lending side and on Nubank, where we see better momentum on lending into Q1, further upside from Payroll lending (introduced into estimates for the first time) and an attractive relative valuation (2-year forward PE).
PagSeguro reported Q4s after close. Numbers missed slightly (1%) at revenue (low end of the guide) on lower take rate but more than made up for it with lower costs, meaning net income came in 4% ahead on a non-GAAP basis (more adjusting for POS write downs).
We held a call with PagSeguro CFO, Artur Schunk, last week where we ran through some high level thoughts on Q4 and outlook for the coming year. Following our Dec-22 upgrade we continue to be very comfortable with expectations for '23 net earnings (BRL1.65 billion), which incorporates no rates cut of note (end-23 expected at the earliest), and drives a 9x PE multiple on the stock.
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