PagSeguro Digital's Stock Has Reached An Attractive Entry Point, Says Bullish Analyst

Shares of PagSeguro Digital Ltd PAGS were trading down on Wednesday.

The stock has lost 20% since April 1, despite the company reporting an acceleration in its first-quarter year-on-year growth in revenues and earnings to 15% and 33%, respectively, according to Goldman Sachs.

The PagSeguro Digital Analyst: Tito Labarta upgraded the rating for PagSeguro Digital from Neutral to Buy, while keeping the price target unchanged at $15.

The PagSeguro Digital Thesis: The current environment in Brazil's payments sector should favor the company, given its competitive offerings in the more profitable small and medium businesses and micro merchant segments, Labarta said in the upgrade note.

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"PagBank has been able to gain the most market share in payments over the last year, with continued gains in the more profitable SMB segment, while stabilizing its market share losses in the micro merchant segment," the analyst wrote.

The pending privatization of Cielo "may create further opportunities" for StoneCo Ltd STNE and PagSeguro Digital to gain share, he added.

The stock's underperformance, which has created an "attractive entry point," has been driven mostly by expectations of higher interest rates in Brazil, Labarta further stated.

PAGS Price Action: Shares of PagSeguro Digital had declined by 0.13% to $11.16 at the time of publication on Wednesday.