2 Digital Payment Platforms Crushing PayPal and Square
2023.08.21 09:27
- PayPal and Block shares are trading down 25% and 12% in 2023, underperforming the S&P 500 Index trading up 14.6%.
- PayPal and Block are leading payment platforms in developed markets, leaving emerging markets to the smaller players.
- DLocal and Stone Co. are focused solely on cross-border payment in emerging markets like Latin America, Brazil, Africa and Asia, with shares trading up 27.7% and 45.4%, respectively.
Payment platforms have experienced impressive growth as consumers and businesses migrate to digital solutions for e-commerce, sending and receiving money. Many platforms have expanded their offerings to include additional financial services and features like marketplaces, loans, peer-to-peer transfers, invoicing, advertising, digital wallets, payment plans and investment services.
The U.S.’s largest and most familiar payment platforms are PayPal Holdings (NASDAQ:) and Block (NYSE:). While these two juggernauts dominate in developed markets, they’ve been slow to expand in fast-growing emerging markets.
Unfortunately, both stocks have underperformed the benchmark indices, with PayPal trading down 20% and Block trading down 12% year-to-date (YTD) compared to the gains of 35% and the S&P 500 gains of 14.6% YTD.
While the dominant two players have seen their shares retreat, many other payment processing solutions providers focused on growing emerging markets are seeing their stocks outperform. Here are two payment platform stocks crushing both PayPal and Block’s performance in 2023.
1. DLocal Limited
Dlocal (NASDAQ:) provides a cross-border payment processing platform primarily focused on emerging markets in Africa, Asia and Latin America. As the name hints, DLocal specializes in local payments in these emerging markets.
Their services include merchant payment processing solutions, alternative payments, local cards, invoicing and payouts. They facilitate cross-border payments with their technology platform as emerging markets localization experts.
Robust Earnings
DLocal shares recently spiked over 50% on its Q2 2023 earnings report indicating 59.3% revenue growth to $161.14 million, beating analyst estimates for $149.36 million. Total payment volumes rose 80% year-over-year (YoY) to $4.4 billion.
The company earned 15 cents per share, beating consensus analyst estimate by 2 cents and reaffirming guidance for 2023. However, the real big news was the appointment of a co-CEO, Pedro Arnt, who comes over as a CFO with a 12-year tenure at MercadoLibre (NASDAQ:).
This news and the 10% short interest helped propel shares nearly 100% the following morning before receding to a modest 54% gain for the week.
2. The MercadoLibre Behemoth
Mercado Libre is one of the largest e-commerce companies focused on emerging markets. Mercado is the largest online marketplace in Latin America, with over 500 million users and 12 million sellers. Its payment platform, Mercado Pago, has over 200 million users processing more than $100 billion in annual payments.
Arnt has been appointed co-CEO effective immediately to serve with DLocal CEO Sebastian Kanovich. DLO shares are trading up 27.7% YTD.
Weekly Descending Triangle Breakout
DLO was in a weekly descending triangle pattern that commenced at $24.65 in November 2023 as shares plunged to $9.03 by May 2023. DLO failed to trigger the weekly market structure low (MSL) bounce through the $16.19 trigger.
Each bounce attempt was met with lower resistance levels until shares finally penetrated and broke out through the ascending trendline resistance at $13.40 in July 2023. Its Q2 2023 earnings and co-CEO announcement helped rocket shares back toward their ascending triangle peak before settling down under $20.
The weekly relative strength index (RSI) oscillator rises towards the 70-band. Pullback support levels are $17.48, $16.19 weekly MSL trigger, $13.49 and $12.34.
StoneCo Ltd.
StoneCo (NASDAQ:) is a cloud-based financial services and payment platform serving merchants in Brazil. It enables merchants to make and accept payments, manage finances and grow their business.
Stone has an 11.2% market share of total processed volume (TPV) in Brazil. It uses a hyper-local distribution strategy with on-demand customer service, ultimately providing micro, small and medium-sized businesses (MSMB) a suite of tools to enhance their financial infrastructure.
The company also provides , credit and software solutions. Merchants can conduct electronic transactions in omnichannel fashion in-store, mobile or online. Its platform is used by over 2.6 million clients processing over $200 billion in payments annually.
Beat and Raise
StoneCo reported Q2 2023 earnings of BRL 0.98 per share, beating BRL 0.86 consensus analyst estimates by BRL 0.12. Revenue grew 28.2% YoY to BRL 2.95 billion, beating BRL 2.90 billion analyst estimates.
The company raised its Q3 2023 revenue guidance to BRL 3.075 billion versus BRL 3.03 billion analyst estimates. MSMB TPV rose 19% YoY growing to BRL 83.3 billion.
This was performed despite macroeconomic headwinds comprised of higher interest rates, rising industry delinquency and declining consumer credit card limits marking a 3.7X improvement over the industry growth rate.
Its MSMB client base grew another 204,000, with the take rate rising 9 bps to 2.48%. The company rolled out debit cards and piloted credit cards for Stone clients. STNE shares are up 45.4% YTD.
Weekly Rectangle Trading Range
STNE has been in a weekly rectangle trading range from $8.13 to $14.34 since January 2022. Each attempt to break out of the range was met with selling, while each attempt to break down through the range was met with buying.
The weekly MSL trigger breakout at $9.62 has kept STNE above $11.08 as it failed three breakout attempts as the weekly RSI looks to fall back down to the 50-band. Pullback supports are $11.08, $10.28, $9.62 weekly MSL trigger and $8.13.
Original Post
