The Growth and Earning Thesis of PagSeguro Digital Ltd. (PAGS) Stock

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PagSeguro Digital Ltd. (NYSE: PAGS), a Brazilian financial technology business, has released a solid fourth-quarter report. The high pace of inflation in Brazil has aided PAGS in dramatically increasing its market share.

Brazil experienced significant inflation in 2021, which continues to this day. However, for PagSeguro Digital Ltd. (PAGS), this was an opportunity that resulted in a gain in market share. The company decided not to raise service prices, which drew clients from organizations where prices had risen significantly.

As a consequence, the number of active merchants on the PAGS platform climbed by 9.4%, and the number of PagBank financial service customers increased by 66.2%.

PagSeguro’s bottom line suffered as a result of the pricing freeze, but the firm has already boosted its loan rates and anticipates earnings to increase by more than 11 percent in 2022.

In general, growing inflation and unemployment may put pressure on PagSeguro’s financial growth, since consumer activity in Brazil may be significantly affected. The company’s report, on the other hand, was good. Revenue increased to $62.2 million in the fourth quarter, up from $41.44 million the previous year.

The volume of payments on the PAGS platform increased by 97 percent year on year to R$456 million (R$- Brazilian Real) at the end of the year. Net profit fell 9.8 percent to R$1.16 billion, while margin fell to 11.2 percent (from 19 percent in 2020 ).

The concern for PagSeguro Digital Ltd. (PAGS) in the face of growing inflation is the profitability of the loan operation. Using borrowed capital and money from deposits, the firm makes loans to corporate clients and credit card loans to consumers. Raising finances might be difficult in times of hyperinflation. 

However, competitors are under similar pressure, and PagSeguro benefits from a contemporary IT infrastructure and cheaper transaction costs than traditional banking operators.

Individual entrepreneurs, small merchants, medium-sized businesses, and end customers in Brazil may all benefit from PagSeguro’s financial services. Digital banking with a full range of services, including contemporary QR payment systems and payroll automation, is included in the list of services.

PAGS was traded off for $20.20 on March 23rd. The market capitalization was $5.43 billion at the time.

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