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Goldman Sachs Downgrades PagSeguro (PAGS) to Sell

December 1, 2022 2:36 AM EST
Get Alerts PAGS Hot Sheet
Price: $9.20 -0.11%

Rating Summary:
    9 Buy, 10 Hold, 2 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 7 | Down: 18 | New: 26
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(Updated - December 1, 2022 5:47 AM EST)

Goldman Sachs analyst Tito Labarta downgraded PagSeguro (NYSE: PAGS) from Neutral to Sell with a price target of $9.00 (from $15.00).

The analyst comments "We downgrade PagSeguro to Sell from Neutral, following weaker than expected 3Q22 results. Our price target falls to $9.0 from $15.0 (15% downside), due to our lower earnings estimates as well as a slightly higher beta of 1.3 vs. 1.2 before, given increased volatility, and lower second stage growth of 16% from 20%, as the growth outlook has slowed. Our PT is based on a 3-stage DCF with a 14.5% COE (up from 14.1%, due to the higher beta), second stage growth of 16%, and terminal growth of 6%. The stock is currently trading at 10.9x 2023E P/E, while our PT implies that it should trade at 9.4x. Key upside risks include: 1) Better than expected take rates, as the company has been repricing its prepayment offering to merchants to compensate for higher financial expenses. If the company can continue to increase takes, this can lead to better revenues and earnings relative to our expectations. 2) Better growth and monetization at PagBank. The company has reached 15.8mn active clients at PagBank in less than three years, more than doubling the number of merchants on the payments side. If the company can successfully monetize this client base, through loans and other banking products, it can lead to better takes, revenues, and earnings compared to our expectations. 3) Execution in the SME segment. The company has quickly ramped up scale in the SME segment, reaching more than 40% of volumes with more than 30% coming from its hubs. Continued growth and market share gains can lead to stronger volume growth and margins can improve as the hubs break even and become profitable. 4) Lower interest rates, which can lead to lower financial expenses and better earnings than expected."

For an analyst ratings summary and ratings history on PagSeguro click here. For more ratings news on PagSeguro click here.

Shares of PagSeguro closed at $10.53 yesterday.


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