On Friday, Citi initiated coverage on shares of DLocal Limited (NASDAQ:DLO), the technology platform enabling global payments, with a Neutral rating and a price target set at $17.00. The firm provided a balanced view of the company's prospects, acknowledging both the strengths and potential challenges ahead.
The new coverage highlights DLocal's robust Total Payment Volume (TPV) growth, attributing it to the emerging markets' rapid catch-up in payments and e-commerce. The report also noted the company's well-regarded new management team and the possibility of DLocal becoming a target for mergers and acquisitions.
However, Citi also pointed out the recent mixed financial results and softer guidance issued by DLocal. The expectation of a compressed take rate, operational challenges in emerging markets, and the need for higher investments were also cited as concerns. Additionally, the report mentioned the ongoing pressure in the fintech space and deemed the current valuation of DLocal as unappealing.
The neutral stance taken by Citi reflects a cautious approach to DLocal's stock, suggesting that the potential risks currently balance out the opportunities. The firm is opting to observe from the sidelines, classifying DLocal as Neutral/High Risk.
The initiation of coverage by Citi and the price target establishment come as part of the transfer of coverage to analyst Gabriel Gusan. This indicates a fresh perspective on DLocal's market position and future within the competitive fintech landscape.
InvestingPro Insights
For investors looking at DLocal Limited (NASDAQ:DLO) following Citi's initiation of coverage, recent data from InvestingPro provides additional context. With a market capitalization of $4.39 billion, DLocal is trading at a P/E ratio of 29.73, which reflects investor expectations of future earnings. Notably, the company's P/E ratio adjusted for the last twelve months as of Q4 2023 stands at 54.01, indicating a premium valuation relative to its earnings. Additionally, the company has experienced substantial revenue growth of 55.24% over the last twelve months as of Q4 2023, signaling strong business expansion.
InvestingPro Tips suggest that DLocal's management has been actively buying back shares, which can be a positive signal of confidence in the company's value. Moreover, the company's cash flows have been robust enough to cover interest payments, a reassuring sign of financial stability. On the other hand, three analysts have revised their earnings estimates downwards for the upcoming period, which could be a point of concern for potential investors. For those considering a deeper dive into DLocal's financials and future prospects, InvestingPro offers additional tips and insights. By using the coupon code PRONEWS24, investors can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking further valuable analysis that could inform investment decisions.
With 8 additional InvestingPro Tips available, investors can gain a more comprehensive understanding of DLocal's potential risks and opportunities. The company's high Price / Book multiple of 9.65 as of the last twelve months ending Q4 2023 suggests a relatively high valuation compared to its book value, which is another factor to consider when evaluating the stock. As the fintech landscape continues to evolve, keeping an eye on these metrics and tips could provide investors with a more nuanced view of DLocal's position in the market.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.