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On Tuesday, Citi analysts upgraded PagSeguro Digital Ltd. (NYSE: NYSE:PAGS) stock rating from Neutral to Buy, with a revised price target set at $10.00, up from the previous $7.00. The new price target suggests a potential upside of 22% from the stock’s recent performance. The stock has shown strong momentum, with a remarkable 35.3% gain year-to-date, according to InvestingPro data.
The upgrade reflects Citi’s increased optimism about PagSeguro’s future earnings and profitability. Analysts at Citi have adjusted their 12-month forward-looking GAAP net income estimates for the company to R$2.4 billion for 2025 and R$2.7 billion for 2026, marking increases of 10% and 14%, respectively.
According to Citi, PagSeguro is currently trading at a price-to-earnings (P/E) ratio of 6.6 times its estimated 2025 GAAP earnings. This valuation is seen as an attractive entry point for investors, especially as the company shifts its focus towards improving profitability. InvestingPro analysis shows the stock trading at a current P/E of 7.31x, which appears attractive given the company’s 16.92% revenue growth over the last twelve months. Get access to 10+ additional exclusive ProTips and comprehensive valuation metrics with InvestingPro.
The analysts also noted a change in the company’s revenue composition, expecting a deceleration in the growth of low-quality LMEC volumes, which should have a positive impact on the overall financial health of the business. Additionally, there is anticipation that PagSeguro might begin distributing dividends as early as the second half of 2025, which adds to the attractiveness of the stock for potential investors.
The upgrade by Citi is significant given that it signals confidence in PagSeguro’s strategic direction and its ability to deliver shareholder value in the near to medium term.
In other recent news, PagSeguro reported favorable fourth-quarter results for 2024 and shared an optimistic outlook for 2025. The company aims to achieve the higher end of its 2025 earnings per share growth guidance of 11-15%. PagSeguro is actively repricing products to target a significant portion of its client base and is taking measures to optimize financial costs. These steps include lowering yields on time deposits and certificates of deposit. In the banking segment, credit is expected to be a key driver of 2025 results, with a focus on secured products. JPMorgan analyst Domingos Falavina raised the stock price target to $12 from $11, maintaining a Neutral rating. Falavina noted the stock is trading at an attractive valuation despite the Neutral rating, which is attributed to a sector preference for competitor Stone. The company’s management also discussed stock buybacks, total payment volume growth, and regulatory issues. JPMorgan updated its 2025 net income GAAP forecast for PagSeguro, increasing it by 13% to R$2.35 billion, aligning with the lower end of the company’s guidance.
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