In a busy week announcing the new CEO, Credit Suisse highly recommended Cielo (CIEL3), according to a report released Friday (26). Analysts Daniel Federel and Victor Ricciotti now have a recommendation Outperform (Above market average, equivalent to buying) against a neutral view, while the target price was hit by three (or 200%), from BRL 2.50 to BRL 7.50, which is a 30% upside potential from today’s close Previous. CIEL3 stock is Ibovespa’s biggest gainer of the year, gaining nearly 160% through Thursday’s session (25).
Among other companies in the acquisition sector, analysts recommend Outperform For PagSeguro (PAGS34) stocks traded in the USA, highlighting strong growth, good wiggle room for a capex (capital investment) housing and cheaper financing perspective from PagBank. However, it does keep Stone (STOC31) as neutral, estimating that the P/E ratio appears more dependent on lower Selic to be attractive.
PagSeguro target price lowered from $40 to $20, still with a potential upside of 32%, due to a 1.5 percentage point cost-of-capital increase, now at 18%, and a higher short-term Selic rate for Stone. Target price reduced from $22 to $12, but still expected a 20% hike for the asset.
Analysts note that last week Credit held its annual conference with the financial sector, heard very positive messages from acquirers, anticipates healthy competition and appears more focused on initiatives to improve returns than boost growth.
Companies consider new price increases (and/or reduced machine support). The companies also highlighted that they do not plan to pass a potential rate cut in the benchmark interest rate.
Shares of paying companies are very sensitive to interest, because it affects not only the cost of equity, but also their significant financial expenses. Given the benign pricing environment in this sector, we believe that acquirers will likely be able to profitably absorb a potential rate cut. Thus, we see plenty of room for equities in the sector if investors gain confidence that inflation is about to peak and there will be a reversal in interest rates,” Federle and Ricciuti assess.
But they contemplate that the opposite is also true. Any frustration due to an interest rate reversal is likely to result in poor performance. They estimate that “inflation is the main risk in our view”.
Analysts note that given that the global interest rate strategist is not optimistic about rapid inflation adjustment, calls In a scenario a rapid rate reversal would be premature, and therefore, a selective approach should be chosen.
Furthermore, in terms of profitability, he sees Cielo’s strong performance in the second quarter (with good growth and margins) as an indication that the sector remains a profitable business in Brazil.
“Although it is a highly competitive market that is constantly affected by the development of technology (eg PIX, receivables clearinghouse, among others), recent data indicates that the acquisition segment is solid in terms of growth and profitability.
For analysts, PagSeguro’s results are more sensitive to Selic than Cielo’s, being the best measure in the event of yield reversal.
“Our models assume a flat rate of 14% per annum in 2022 and 11.75% per annum in 2023 and beyond, which is largely in line with fixed income market returns. PAGS and STNE are growing rapidly, but with pressure margins. Thus, the relationship between price And profit doesn’t look attractive. While we expect the two companies to control costs, margins aren’t improving enough for the Selic rate to start dropping. On the positive side, a small reduction in the Selic rate can quickly lead to multiple attractions,” the analysts note.
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