The investment banking and securities group Goldman Sachs downgraded the rating of the dLocal sharesthe technology company that became the Uruguay’s first unicorn, and significantly lowered its target price amid various factors that contributed to a less optimistic outlook for the fintech.
The year of dLocal The company has not been the best in terms of performance in the markets, and the most important financial analysts in the world are beginning to perceive this as well. In this sense, Goldman Sachs cut the rating of the payment processing company from Buy to Buy at the end of June. Neutral (Hold or Maintain) in a research note sent to investors in its client portfolio. It also reduced the target price from 16 to dollars.
This review occurs after a period in which the shares of dLocal (Nasdaq:DLO) have lost 38% of their value in the last twelve months, while the MSCI LatAm Index fell by only 11% in the same time.
In this sense, Goldman Sachs believes that the risks down for the company’s provisions, especially given the 29% drop in the forecast for the benefits for share (EPS), which suggests potential risks, as well as limited visibility into the evolution of the gross profit and that of the absorption rate for the Uruguayan firm.
Among the factors that contributed to the negative revision of the rating of the shares of dLocal, The financial group’s analyst pointed out the devaluation of currencies in several key markets, such as Argentina, Nigeria and Egypt; the shift of volumes towards local transactions, which translates into a continued decline in the capture rate; and the increased expenseswhich is putting pressure on the profit margins.
Other reviews that raise alarm bells
Goldman Sachs was not the only company that recently published reports on dLocal with downward revisions for the Uruguayan unicorn. Also JPMorgan Chase & Co. lowered its price target from $17 to $14 and set a neutral rating for the company.
Also, in the last two months, Bank of America lowered the target price from $18 to $15, HSBC He did it from 19 to 17, UBS Group cut from $13 to $9, and Citigroup rose from $13 to $9. All companies gave the stock a neutral rating, with the stock currently hovering around $8.
This happens after dLocal reported a 50.1% year-over-year drop in first-quarter profits to $17.72 million. Earnings were primarily affected by a decline in sales ebitda (earnings before interest, taxes, depreciation and amortization), which in turn was caused by pressure from higher corporate expenses as well as higher tax rates.
According to the company’s report, quarterly EBITDA profits reached $37 million, down 19% year-on-year and down 25% compared to the fourth quarter of 2023.
Source: Ambito
