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Why PagSeguro Digital Stock Jumped 25.3% Last Month

By Keith Noonan – Jun 5, 2020 at 12:22PM

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The fintech stock has rallied since hitting a lifetime low in March, and shares are now up roughly 4% year to date.

What happened

Shares of PagSeguro Digital (PAGS 1.77%) gained 25.3% in May, according to data from S&P Global Market Intelligence. The Brazilian payment-processing stock gained ground in conjunction with momentum for the broader market, and it got a pronounced boost at the end of the month thanks to better-than-expected quarterly results.

^SPX Chart

^SPX data by YCharts

PagSeguro published its first-quarter results on May 28, delivering sales and earnings results that came in ahead of the market's benchmarks. The company posted non-GAAP (adjusted) earnings per share of 1.11 Brazilian reais on revenue of 1.59 billion reais, while the average analyst target had called for earnings per share of $1.08 reais on sales of 1.48 billion reais. 

A credit-card processing machine.

Image source: Getty Images.

So what

PagSeguro stock faced pressures stemming from the spread of the novel coronavirus in Brazil and weakness for the country's currency, but momentum for the broader market and encouraging first-quarter results helped the company close out the month with strong double-digit gains. Revenue for the period rose 26.9% year over year, and adjusted net income was up 12.8% year over year to reach 367 million reais. The number of active merchants on PagSeguro's platform hit 5.5 million (up 25% year over year), total payment volume increased 29.7% compared to the prior-year period, and the company's take rate on payments rose 19% year over year to reach 3.31%.

Now what

PagSeguro stock has continued to rally in June's trading, with shares up roughly 19% in the month so far.

^SPX Chart

^SPX data by YCharts

The company withdrew its guidance for full-year total payment volume, take rate, and net income margin in response to uncertainty created by the novel coronavirus. However, management said that it expects net income margins to be similar to those seen in the first quarter. Payment-processing services look to have a long runway for growth in Brazil, but the current challenging economic conditions in the country suggest that investors should approach the stock with the potential for significant near-term volatility in mind.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends PagSeguro Digital. The Motley Fool has a disclosure policy.

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