On Thursday, UBS analyst Kaio Prato adjusted the firm's stance on DLocal Limited (NASDAQ:DLO), upgrading the stock from Sell to Neutral. Alongside the rating change, the price target was revised downward to $9.00 from the previous target of $13.00. The adjustment follows a significant decline in the company's stock value and a reassessment of risks and valuations.
The analyst noted that despite ongoing uncertainties regarding DLocal's Total Payment Volume (TPV) mix and take rates, the current risks appear more balanced. This observation comes after consensus estimates for the company saw a 20% reduction subsequent to its first-quarter results for 2024. DLocal's stock has experienced a notable drop, approximately 45% since the disclosure of its last month's results.
The downgrade in the price target to $9.00 from $13.00 is attributed to a series of factors impacting DLocal's financial performance. The company reported an earnings per share (EPS) miss of around 50% for the first quarter of 2024, which led to a recalibration of UBS's expectations. As a result, estimates for the years 2024 to 2028 have been lowered by 21%.
The revised estimates take into account the potential for merchant renegotiation, necessary investments, and the volatility in specific markets where DLocal operates, notably Argentina and Nigeria. These elements have contributed to the reassessment of the company's outlook and the updated price target.
DLocal's recent financial performance and the subsequent analyst upgrade to Neutral reflect the firm's current view of the stock's potential in light of recent challenges and market conditions. The new price target of $9.00 represents UBS's adjusted expectations for the company's valuation and future performance.
In other recent news, DLocal, a cross-border payment platform, has been the subject of substantial investor interest following its mixed Q1 2024 earnings results and a significant price target reduction by Citi.
The company reported a nearly 50% year-on-year total payment volume (TPV) growth, reaching $5.3 billion, primarily driven by a surge in e-commerce and remittances.
Despite this impressive TPV figure, DLocal's financial results were mixed, with a revenue growth exceeding 30% year-on-year, but flat gross profit growth and a decline in adjusted EBITDA.
Citi, in response to these results, reduced DLocal's stock price target from $17.00 to $10.50, maintaining a Neutral rating. The investment bank expressed concerns about the company's performance and outlook, suggesting that DLocal's annual guidance might be revised in the upcoming second-quarter report. Citi analysts noted that DLocal's current investments could foster future growth, but are presently impacting profitability.
In addition to its earnings results, DLocal announced a $200 million share buyback program, demonstrating confidence in its long-term growth prospects. The company is also considering potential mergers and acquisitions to enhance its offerings.
Despite current challenges, DLocal remains focused on diversifying its merchant base and reducing reliance on a few large merchants. These are among the recent developments that investors will continue to monitor.
InvestingPro Insights
As DLocal Limited (NASDAQ:DLO) navigates through its recent stock value decline and the market reassesses its risks, real-time data and insights from InvestingPro provide further context to investors. The company's market capitalization stands at $2.16 billion, reflecting its current valuation in the market. Despite recent challenges, DLocal's revenue growth remains robust, with a 48.8% increase over the last twelve months as of Q1 2024, and a 34.34% quarterly revenue growth in Q1 2024.
An InvestingPro Tip highlights that the stock is currently trading near its 52-week low, which may indicate a potential entry point for value investors. Furthermore, the company's strong cash flows, which can sufficiently cover interest payments, suggest a degree of financial stability amidst the volatility. For those considering an investment, these aspects may be particularly relevant.
It's also worth noting that analysts on InvestingPro have predicted that the company will be profitable this year, which could be a signal for future growth potential. For readers interested in a deeper dive into DLocal's financial health and future prospects, InvestingPro offers additional tips. By using the coupon code PRONEWS24, investors can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, accessing a wealth of information including 13 additional InvestingPro Tips for DLocal.
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