dLocal Down 81% – A Buying Opportunity?

 

POINTS

  • dLocal (DLO) is a global fintech company enabling e-commerce payments in emerging markets.
  • Despite an 81% decline from its all-time high, revenue has grown 600% since its IPO.
  • Total Payment Volume (TPV) increased by 41% in 2024, with revenue up 13%.
  • Currently valued at 27 times free cash flow (FCF), suggesting potential undervaluation.
  • Key clients include Amazon, Spotify, Uber, and Netflix.

Details

source : pixabay(payment)


dLocal (NASDAQ: DLO) Overview

  • Business Model
    • Operates in emerging markets (Latin America, Africa, and Asia), offering 900+ payment options to over 2 billion consumers.
    • Facilitates payments for global enterprises without requiring international credit cards.
    • Before dLocal, customers without international credit cards faced challenges making purchases, but dLocal enables local payment processing.
  • Major Clients
    • Amazon, Spotify, Uber, Shopify, Netflix, and other global companies.

Revenue and Financial Growth

  • 600% revenue growth since IPO in 2021.
  • Total Payment Volume (TPV) up 41% in 2024, revenue up 13%.
  • Free Cash Flow (FCF) margin stable at 21%, ensuring strong cash generation.
  • Outstanding shares reduced by 2%, signaling shareholder-friendly policies.
YearTotal Payment Volume (TPV, $B)Revenue ($B)Free Cash Flow (FCF) Margin
20212.30.422%
20223.60.621%
20235.10.921%
20247.21.0221%

Growth Drivers & Competitive Advantage

Increasing Demand for Digital Payments in Emerging Markets

  • Rapid growth in internet penetration & e-commerce adoption in emerging markets.
  • Projected digital payment market to reach $3.7 trillion by 2028.
  • Emerging market urban GDP is growing 3.5 times faster than that of developed economies.

Strong Competitive Moat & Network Effect

  • High entry barriers due to tax regulations, foreign exchange settlements, and compliance requirements in different countries.
  • dLocal partners with local payment providers and regulators, making it difficult for competitors to replicate its network.
  • Expanding presence in more countries strengthens its competitive advantage.

CEO Pedro Arnt's Leadership

  • Former CFO of MercadoLibre, instrumental in the growth of MercadoPago, Latin America’s largest fintech.
  • Played a key role in transforming MercadoLibre into the region’s e-commerce leader.
  • Likely to drive dLocal’s expansion into the next stage of growth.

Strong Free Cash Flow & Share Buybacks

  • Maintains a 21% FCF margin, indicating solid cash flow generation.
  • Executed a $100M share buyback in 2022 and is halfway through a $200M buyback program in 2023.
  • Unlike most growth stocks, which increase share dilution, dLocal is actively reducing outstanding shares, benefiting long-term investors.

Future Outlook

Margin Stabilization

  • dLocal has sacrificed margins in favor of market expansion but is now showing signs of stabilization.
  • FCF margins have remained consistent over recent quarters, suggesting improved cost control.
  • Profitability is expected to improve as operational efficiencies increase.

Expansion of the Emerging Market Payment Sector

  • dLocal’s key regions (Latin America, Africa, and Asia) are experiencing faster e-commerce growth than developed markets.
  • As global companies expand into emerging markets, dLocal’s platform will become increasingly valuable.

Increasing Adoption by Global Enterprises

  • Amazon, Netflix, Uber, and Spotify are already using dLocal’s services.
  • More global corporations expanding into emerging markets will likely drive higher adoption of dLocal’s payment solutions.

Undervalued Stock with Growth Potential

  • dLocal is currently trading at 27 times free cash flow (FCF), lower than the S&P 500 average.
  • Given its growth potential, it could be significantly undervalued, making it an attractive long-term investment.

Conclusion

  • dLocal is a fintech leader solving cross-border payment challenges in emerging markets.
  • Despite an 81% stock decline, the company’s revenue and customer base continue to grow rapidly.
  • Strong global client base and expansion in high-growth markets suggest long-term potential.
  • Currently undervalued relative to its future growth prospects, making it a compelling long-term investment.

✅ Investors looking for fintech growth stocks should consider dLocal.

📌 Source: The Motley Fool, NASDAQ, dLocal 2024 Financial Reports.

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