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Citi bullish on PagSeguro stock, anticipates take rate stabilization

EditorEmilio Ghigini
Published 03/20/2024, 07:20 AM
© Reuters.

On Wednesday, Citi updated its stance on PagSeguro Digital Ltd. (NYSE:PAGS), a company specializing in financial services for small and medium-sized businesses (SMBs), by increasing its price target to $16 from the previous $13. The firm maintains a Buy rating on the stock.

The revision comes after a year where PagSeguro faced challenges with its take rate due to its strategy of concentrating on the SMB segment. Despite the concerns over the pace of take rate reductions, the analyst suggests that the period of heightened pressure may be coming to an end, indicating a potential for stabilization.

PagSeguro's strong Total Payment Volume (TPV) growth, combined with an anticipated take rate stability and reduced financial expenses, are expected to contribute positively to the company's bottom line in 2024. The analyst's projection is backed by a valuation of 11 times the 2024 estimated Price to Earnings (P/E) ratio.

The firm also adjusted its net income estimates for PagSeguro, with an increase of 2.9% for 2024 and 1.3% for 2025 compared to previous forecasts. This reassessment has led to the raised price target, reflecting a more optimistic outlook for the company's financial performance in the coming years.

The analyst also noted a change in the risk rating for PagSeguro, moving away from the High Risk category. This suggests a more confident view of the company's market position and its future prospects.

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