Sell Rating on Pagseguro Digital Due to Declining Profitability and Market Share

Morgan Stanley analyst Jorge Kuri reiterated a Sell rating on Pagseguro Digital (PAGS – Research Report) yesterday and set a price target of $5.00.

Jorge Kuri has given his Sell rating due to a combination of factors impacting Pagseguro Digital’s financial performance. The company’s GAAP net income fell short of both consensus and Morgan Stanley’s estimates, indicating weaker-than-expected profitability. Additionally, the operating level results were concerning, with pre-tax profits declining and missing consensus expectations, signaling potential operational challenges.
Moreover, Pagseguro Digital experienced a decline in acquiring TPV, losing market share amidst intensifying competition in the industry. This competitive pressure is further highlighted by the contraction in gross profit margins, which suggests that repricing efforts have not been sufficient to counteract rising funding costs. The net client losses in both acquiring and banking segments also raise concerns about the company’s ability to retain and grow its customer base, contributing to the Sell rating.

According to TipRanks, Kuri is a 2-star analyst with an average return of -0.2% and a 46.15% success rate. Kuri covers the Financial sector, focusing on stocks such as Nu Holdings, XP, and Inter & Company Incorporation Class A.