Tero Vesalainen
Bank of America resumed coverage on DLocal (NASDAQ:DLO) at Buy after the firm announced a stock buyback program and proposed share purchases by shareholders, calling it “a sign of confidence in DLO’s future prospects”.
BofA said the Uruguayan payment services firm has an “enviable” customer base and an attractive blend of organic growth and profitability – both well in excess of peers.
But analyst Jason Kupferberg noted risks including competition, recent management exits and near-term sentiment overhang from Muddy Waters’ short seller report.
Going over the short seller report, Kupferberg said the allegation of overstated take rates caught the most attention. “Given the sophistication of DLO’s enterprise customers (such as Amazon and Google), we do not believe it is realistic that DLO is charging a huge premium vs. other providers.”
BofA believes enhancing financial disclosures and guidance policies would be well-received by the market.
One area in the short seller report that BofA agrees with is potential risks associated with the high degree of manual back-office processes. But DLocal (DLO) is currently migrating to a SAP financial system, to be completed in H1 2023.
“We forecast revenue/EBITDA growth of 71%/56% and 41%/33% in 2022 and 2023, respectively, driven by DLO’s positioning in higher growth/less-penetrated emerging geographies,” said Kupferberg.
BofA set $18 price target on DLocal (DLO), implying 20.4% potential upside to its last close.
The research firm’s stance is in line with bullish sell-side ratings. But SA Quant believes DLocal (DLO) is at high risk of performing badly due to decelerating momentum and high valuation.
Image and article originally from seekingalpha.com. Read the original article here.