On Monday, JPMorgan analyst Domingos Falavina increased the price target on PagSeguro (NYSE:PAGS) to $12 from $11, while keeping a Neutral rating on the stock. According to InvestingPro data, the stock currently trades at an attractive P/E ratio of 7x, with analysts setting price targets ranging from $5.29 to $15.91. In a recent discussion with PagSeguro’s CFO Artur Schunck and IRO Gustavo Sechin, the focus was on the company’s goal to achieve the higher end of its 2025 earnings per share (EPS) growth guidance of 11-15%. The company is actively repricing products to target approximately 70-80% of its client base and is taking steps to optimize financial costs, such as lowering yields on time deposits and certificates of deposit (CDs). This strategic focus appears to be paying off, as InvestingPro reports three analysts have recently revised their earnings estimates upward for the upcoming period.
PagSeguro is also implementing measures to manage general and administrative expenses in response to the challenging macroeconomic environment. This includes reducing staff and exercising CAPEX rationality. Management highlighted their commitment to margin improvement and revenue diversification over total payment volume (TPV) growth. In the banking segment, which constitutes around 20% of gross profit, credit is anticipated to be a key driver of 2025 results. The company plans to maintain a cautious stance, focusing on secured products that currently make up about 85% of the portfolio and viewing private payroll as a potential opportunity.
Furthermore, the conversation with the executives addressed topics such as stock buybacks, TPV growth, and regulatory issues. JPMorgan updated its estimates for PagSeguro, increasing the 2025 net income GAAP forecast by 13% to R$2.35 billion, which represents an 11% year-over-year growth, aligning with the lower end of the company’s guidance. The company maintains a solid financial foundation with a current ratio of 1.51 and an impressive YTD return of 28.59%, according to InvestingPro data, which rates the company’s overall financial health as "GOOD."
After reporting favorable fourth-quarter results for 2024 and presenting an optimistic outlook for 2025, PagSeguro’s stock is considered by JPMorgan to be trading at an attractive valuation. The stock’s price-to-earnings (P/E) ratio for 2025 is estimated at approximately 6.0 times, and the price-to-book value (P/BV) ratio is 0.8 times for an expected 15% return on equity (ROE) at a 28% Basel rate. Despite the Neutral rating, Falavina sees more potential for upside risk in the stock price, attributing the rating to a sector preference for competitor Stone rather than a lack of upside potential for PagSeguro. This view aligns with InvestingPro’s Fair Value analysis, which suggests the stock is currently undervalued. Subscribers can access the comprehensive Pro Research Report for deeper insights into PagSeguro’s valuation metrics, growth prospects, and financial health indicators.
In other recent news, PagSeguro Digital Ltd reported its highest quarterly net income in company history, with earnings per share (EPS) surpassing analysts’ expectations. The company achieved an actual EPS of 1.78 BRL, beating the forecast of 1.7 BRL, and reported revenues of 4.83 billion BRL, exceeding the expected 4.59 billion BRL. Despite this strong financial performance, the stock experienced a drop in pre-market trading. PagSeguro’s total revenue increased by 20% year-over-year, reaching 4.83 billion BRL, and its net income rose by 30% to 572 million BRL. The company continues to expand its client base and product offerings, particularly in the Brazilian electronic payments sector, which remains robust with significant growth potential. Additionally, PagSeguro’s banking revenues saw a 52% year-over-year increase, contributing to its competitive position as the second-largest digital bank in Brazil. Analysts have taken note of these developments, with some highlighting the company’s strategic focus on micro, small, and medium businesses and its expansion into online and cross-border payments. The company remains optimistic about exceeding its 2024 guidance, with plans to further diversify its product offerings and reduce funding costs.
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