What happened
Shares of the Uruguayan payments company DLocal (DLO -0.83%) traded nearly 11% higher as of 11:33 a.m. ET. today. The company sold off pretty significantly yesterday after reporting earnings results for the fourth quarter, but investors seem to feel better about those results today.
So what
Fourth-quarter earnings and revenue both missed consensus estimates. The company is also reportedly facing headwinds because it still has deposits with the crypto exchange FTX, which declared bankruptcy after widespread fraud allegations.
Furthermore, DLocal said it spent about $2 million on an independent counsel, expert services, and a forensic accounting advisory for an internal review after allegations from a short-seller report in December.
Investors might also be concerned about its slowing growth. In 2022, revenue grew roughly 72%, but in 2023, DLocal is only guiding for revenue to grow by 53% at the top end of the range.
Still, total payment volume across the company's network hit $3.3 billion, which is the highest volume seen over the last five quarters.
CEO Sebastian Kanovich also said that the results were achieved during "unprecedented territory" at the end of 2022, and there could be a recession on the horizon, which can hurt payment networks and slow their volume.
Now what
Given that DLocal still trades at a fairly pricey growth valuation of more than 21 times forward earnings, the stock is going to be more susceptible to a sell-off if growth slows, especially given that there could be a recession. Some of the nonrecurring charges could be a concern as well.
But the company is still profitable, has doubled its merchant size since 2020, and is still guiding for decent growth, all things considered. I think the stock could still be a winner over the long term.
