PagSeguro Digital (NYSE:PAGS) lost almost 8% on September 26 following the imposition of a cap on interchange fees of prepaid and debit cards by the Central Bank of Brazil.
In addition, the bank has also announced the same settlement period for both types of transactions.
Headquartered in Brazil, PagSeguro Digital Ltd. offers financial technology solutions to micro-merchants, small companies, and medium-sized companies.
Wall Street’s Take on the News
The 0.7% cap on prepaid transactions imposed by the Bank is half of the 1.5% fee currently charged by the card issuers. While acquirers will gain from the lower transaction costs, they may be negatively impacted by the same settlement period.
Following the news, Citigroup analyst Gabriel Gusan stated that “the impact should be much smaller than the 4% of revenues previously estimated when the public hearing came out last year”. Gusan has a Buy rating on the stock with a price target of $20 (58.6% upside potential).
Another analyst, Mario Pierry from Bank of America Securities, reiterated a Buy rating on the PAGS stock following the news. Pierry believes that the company will “be able to mitigate some of the impact with lower costs on acquiring operations.”
According to his estimation, interchange fees on prepaid card transactions comprise 60%-70% of PagBank’s revenue and about 5%-6% of PagSeguro’s consolidated revenue.
What is the Market Capitalization of PagSeguro Digital Ltd.?
Listed on the New York Stock Exchange (NYSE), PagSeguro Digital Ltd. currently has a market capitalization of $4.16 billion. The company has lost three-fourths of its market capitalization over the past year.
As per TipRanks, analysts are cautiously optimistic about the stock and have a Moderate Buy consensus rating, which is based on four Buys and two Holds. Pagseguro Digital’s average price forecast of $17.50 implies 38.78% upside potential.
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