PagSeguro shines in Q1, led by hidden gem PagBank
PagSeguro (PAGS) reported strong Q1 earnings on Wednesday, with revenues topping analyst estimates by 5% and growing at a healthy 30%+ year over year. PAGS stock has gained +8% this week alongside the positive report, extending the stock’s great performance run after rallying +7% in May.
Despite an unusual Q1 in Brazil, with reinstated lockdown measures in March, PAGS was able to generate robust Total Payment Volumes of $81.4bn BRL (+102% YoY).PagSeguro’s ability to deliver a strong quarter despite the challenging Brazilian macro environment reinforces our investment thesis in the company and its ability to perform well and continue to take market share from competitors amidst changing market conditions.
PAGS’ strong quarter was supported by significant momentum from its PagBank business, which contributed $31bn BRL (+259% YoY). We believe PagBank is the hidden jewel of the company, and we believe it remains currently underappreciated and undervalued by the market. PagBank’s jaw-dropping growth metrics in Q1 (5M+ new clients and +$24B BRL in TPV since Q120) coupled with its significant upside potential from new vertical expansion opportunities provide further conviction in our view that PagBank will be a key driver of future growth.
PAGS has quickly evolved from a small company that created banking solutions for the long-tail segment of Brazil to an emerging powerhouse within Brazil’s payments ecosystem.As electronic payment adoption in Brazil continues to grow, we believe PAGS remains well-positioned to capitalize on these strong secular tailwinds and generate robust growth over the long-term.