On Wednesday, Citi updated its assessment of DLocal Limited (NASDAQ:DLO), a cross-border payment platform, by reducing the price target from $17.00 to $10.50 while retaining a Neutral rating. The adjustment follows the company's first-quarter results for 2024, which raised concerns about its performance and outlook.
The company's recent quarterly report indicated a significant shortfall, leading to skepticism about the achievability of its annual guidance. Analysts at Citi anticipate that the guidance may be revised in the upcoming second-quarter report. The firm noted that while DLocal's current investments could foster growth in the future, they are presently impacting the company's profitability.
Citi's analysis highlighted that despite a recent drop in DLocal's stock price, the valuation does not appear compelling. The firm cited a price-to-earnings (P/E) ratio of 15 times the estimated earnings for 2024, considering the significant reduction in their earnings estimates. This valuation is seen as unattractive given the high baseline from which the company is starting.
The investment bank emphasized its cautious stance by maintaining a Neutral/High Risk rating on DLocal shares. This position reflects the uncertainties surrounding the company's financial projections and the potential need for adjustments in its forward-looking statements. The bank's analysts will continue to monitor DLocal's financial performance and strategic investments to assess their impact on the company's growth trajectory and profitability.
InvestingPro Insights
Following the recent assessment by Citi, InvestingPro data provides additional context for investors considering DLocal Limited (NASDAQ:DLO). The company's market capitalization stands at approximately $2.49 billion, with a P/E ratio that has expanded to 46.0 based on the last twelve months as of Q1 2024, reflecting a premium valuation relative to near-term earnings growth. Despite the concerns raised, DLocal shows robust revenue growth of 48.8% over the same period, indicating potential for future expansion.
Two pertinent InvestingPro Tips for DLocal include the company's aggressive share buyback strategy and the RSI indicator suggesting the stock is currently in oversold territory. These insights could signal a strategic move by management to capitalize on the stock's current valuation and a potential technical rebound, respectively. For investors seeking deeper analysis, there are additional tips available on InvestingPro, including further financial metrics and analyst predictions. Interested readers can unlock these insights and enjoy an additional 10% off a yearly or biyearly Pro and Pro+ subscription with the coupon code PRONEWS24.
It's also noteworthy that despite recent price declines, analysts predict DLocal will be profitable this year, and the company has maintained a solid gross profit margin of nearly 40%. While the stock has experienced high volatility and a significant drop over the last month, it's trading near its 52-week low, which could present a buying opportunity for long-term investors. For a more comprehensive analysis, including a total of 15 InvestingPro Tips, visit https://www.investing.com/pro/DLO.
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