- KeyBanc analyst Josh Beck remained Sectorweight on PagSeguro Digital Ltd (NYSE:PAGS).
- Beck updated CY23 estimates for PAGS as the analyst further evaluated macroeconomic trends and company-specific drivers.
- Beck took his TPV estimate lower primarily on headwinds related to consumer spending versus CY22.
- Active merchants are taken lower due to continued net churn relating to the micro-merchant base, though they have minimal impact on the analyst’s TPV revision.
- Beck’s revenue estimate moves lower as a result of TPV changes.
- The analyst also took financial expenses higher to reflect the higher rate environment better.
- Lower net income comes as a result of the above estimate changes.
- Beck’s CY22 estimates were essentially unchanged.
- PagSeguro operates in the desirable Brazilian market, which is ~30% penetrated.
- With a brand boost from parent UOL, PagSeguro has crafted a disruptive model and added over ~5 million active merchants to its platform.
- The narrative around the consumer-focused PagBank digital account could develop similarly to other successful FinApps like Block, Inc (NYSE:SQ) Cash App or PayPal Holdings, Inc (NASDAQ:PYPL) Venmo.
- The PagBank FinApp meets the needs of ~90 million underserved consumers in Brazil, and early data suggests a strong PMF with a top 10 financial service app store ranking despite a launch.
- While remaining constructive on PagBank’s potential, the analyst recommends Sector Weight positions looking for increased visibility into scaling efforts.
- Price Action: PAGS shares traded higher by 1.1% at $7.78 on the last check Monday.
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