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PagSeguro - The Next Super App Of Brazil

Aug. 04, 2021 12:02 PM ETPagSeguro Digital Ltd. (PAGS)29 Comments
JJ Brink, CA, CFA profile picture
JJ Brink, CA, CFA


  • Founded in 2006, PagSeguro began its operations as a merchant acquirer providing payment processing services. Today, the company is a hybrid of a bank and a tech company.
  • Located in Brazil, a country with very high cash usage and a population of 210 million, PagSeguro is a disruptive player operating in a highly penetrable market.
  • PagSeguro has grown its revenue from R$1.1 billion in 2016 to R$6.8 billion in 2020, and the number of merchants using its payment processing services has grown from 1.4 million.
  • Traditional incumbent players have poorly serviced 60 million people, resulting in a massive penetration opportunity for PagBank.
  • PagBank is still being relatively overlooked by the market when you take a 10-year view of the business.

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This article was written by

JJ Brink, CA, CFA profile picture
JJ is a global equity analyst at Flagship Asset Management, an institutional investor. He is a qualified Chartered Accountant CA[SA] and a CFA chartholder. He specializes in the Fintech sector covering a range of disruptive companies that have large re-rating potential. His colleague, JD Hayward, is also a Seeking Alpha contributor.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of PAGS either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (29)

JJ Brink, CA, CFA profile picture
This sell-off is obscene off the backend of Q3 results. PAGS traded at these levels back in 2018 and the sell off is greatly a function of macro conditions which apply to the broader sector. PAGS has the ability to pass on a lot of these incremental costs to the consumer (should they see fit despite the fact it is not their immediate goal). Point being, if you are an investor with a time horizon of 5+ years, do yourself a favour and pile in. I have doubled my position at these levels.
whitehead1 profile picture
$PAGS going down on no news, anyone has figured out why its falling?
Go and do likewise profile picture

Oct. 11, 2021 11:41 AM ET
PagSeguro stock slumps for second day on regulation that could cap key fee

There are rumours in the market that the Brazilian government would put more regulation on pre-paid cards.
JJ Brink, CA, CFA profile picture
See below link to an update on PAGS.

Fleipeg profile picture
@JJ Brink, CA, CFA - thanks for the update.
I just read something about one of the many institutional investors (it's approx. 71% institutional) selling some shares. This stock has great growth potential and a $69 target price (the lowest analyst target that I see is around $49). I just put in for three more stock/option orders on it.
Grant Nelson profile picture
Only added 1m new accounts (12m in total)
Grant Nelson profile picture
Perhaps user growth was lower than expected?
This drop smells fishy. Something is up. Guess we will find out soon enough.
No news, looks like some dark pool liquidation or market maker manipulation for accumulation. Great stock, great price. IMO, time to buy more!
Xav Welsh profile picture
@mwoo44 PAGS now down 15% on the day. This was a $55 stock a week ago…
Go and do likewise profile picture
Q2 and Q3 comparison

October 7th, 2021 - PagSeguro Digital Ltd. announces 3Q21 all-time high operating metrics:
• Consolidated total payment volume1 (TPV) of R$125.0 billion in 3Q21, up 85% y/y
• Acquiring total payment volume2 (TPV) of R$66.8 billion in 3Q21, up 49% y/y. Ex-Coronavoucherup 58% y/y
• 12.2 million PagBank active users3, growth of 1.0 million in 3Q21

July 20, 2021 - PagSeguro Digital Ltd. announces 2Q21 all-time high operating metrics.
• 11.2 million PagBank active users1, growth of 2.1 million in 2Q21;
• Consolidated total payment volume2 (TPV) of R$101.4 billion in 2Q21,up 151% compared to 2Q20;
• Acquiring total payment volume3 (TPV)of R$56.3 billion in 2Q21,up 89% compared to 2Q20.
@Go and do likewise Great numbers. Why the fall?
Go and do likewise profile picture
@ashah64 I have not followed this stock, so I do not know what was expected. Maybe growth slowing. Pagbank acquired 2.1M customers in Q2 and 1.0M in Q3.
@ashah64 Look at STNE
Any reason for the recent drop in price?
Xav Welsh profile picture
@ashah64 Perhaps general uncertainty about the Brazil market. I am long PAGS and def feeling the pain of the past few weeks of terrible relative performance
@Xav Welsh Thanks Xav. Can’t find any news. I am putting an order around $38 to average in.
Go and do likewise profile picture
@ashah64 They reported Q3 numbers. Financials to follow on Nov 11.
JJ Brink, CA, CFA profile picture
See link to update on 2Q21 results:

11 Aug. 2021
Brazilian here living in the US. PAGS is everywhere indeed and the analysis is spot-on on the behavior of people splitting their payments. I think PAGS has a phenomenal opportunity tying the POS with banking and handling payment splits better. I've known about PAGS for years and even coded some integration software 10 years ago when they were just a merchant. It's great to see them growing to this level of execution.
Deja vu! You repeated the middle of the article twice. LOL!

The repeated section begins "Will PagBank succeed? We think so. Let us dig a little deeper into the investment case."
JJ Brink, CA, CFA profile picture
@Mike G. Twice for emphasis! #PagBank. Kidding, thanks for pointing that out
We are long PAGS, MELI and STNE. All since June 2020.
Great information. Which one amongst pags meli stne?
JJ Brink, CA, CFA profile picture
I prefer PAGS to STNE;

1) STNE is still more expensive (admittedly its price has come down quite a bit).
2) Less attractive customer acquisition strategy (software solutions).
3) No benefit of a two-sided network.
4) Our view is on PAGS' ability to penetrate the Micro/SME lending market (which STNE doesn't really engage in, at least not to the extent PAGS' does).

I prefer PAGS to MELI:
Meli, again, has a slightly different model but I do like their customer acquisition strategy (similar to Rakuten (4755) in Japan which I am writing a report on next). Meli focuses on online through their ecommerce market place where as PAGS' is almost entirely brick-and-mortar.
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