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Investing.com - Morgan Stanley has raised its price target on PagSeguro (NYSE:PAGS) to $7.70 from $7.00 while maintaining an Underweight rating on the stock. This target remains significantly below PagSeguro’s current trading price of $9.59, despite the stock’s impressive 64% year-to-date return. InvestingPro data indicates the company appears undervalued based on its Fair Value assessment.
The firm expects a significant slowdown in total payment volume growth at PagSeguro due to saturation in the digital payments market, according to Morgan Stanley analyst Jorge Kuri. However, PagSeguro has maintained 10.9% revenue growth over the last twelve months, with a robust five-year revenue CAGR of 27%.
Morgan Stanley anticipates PagSeguro’s market share gains will slow down because the company already has a large share in the micro, small, and medium business segment, and increased market saturation is leading to heightened competition. Despite these concerns, PagSeguro trades at a low P/E ratio of 7.1 relative to its growth prospects, with a PEG ratio of just 0.42.
The investment bank forecasts that competition will drive significant pricing pressure, particularly in pre-payment services, which reportedly generate 100% of PagSeguro’s profits. Regulatory risks to the availability of "parcelados" (installment payments) could further pressure the pre-payment business.
Morgan Stanley also noted diminishing operating leverage due to rising sales and marketing expenses in a more competitive market, adding that banking and credit services are unlikely to offset the expected decline in the payments business given their relatively small size.
In other recent news, PagSeguro Digital reported its Q2 2025 earnings, highlighting a notable increase in both revenue and earnings per share. The company’s total revenue grew by 11% year-over-year, reaching BRL 5.1 billion, while diluted GAAP EPS rose by 14.2% to BRL 1.79. Despite economic challenges in Brazil, PagSeguro expanded its client base and improved its financial performance. In a separate development, Goldman Sachs downgraded PagSeguro’s stock from Buy to Neutral, citing headwinds in total payment volume growth and a decline in market share. The downgrade was accompanied by a reduction in the price target to $9.00 from $12.00. Meanwhile, Morgan Stanley raised its price target for PagSeguro to $7.00 from $5.00, maintaining an Underweight rating. This adjustment reflects updated earnings per share forecasts and a slightly reduced discount rate in Morgan Stanley’s valuation model. These recent developments provide investors with varied perspectives on PagSeguro’s current and future performance.
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