Since peaking in October, stocks in sky 🇧🇷CIEL3) dropped by around 30%. Against Ibovespathe paper underperformed by more than 20% in the period, highlights the BTG Pactual🇧🇷
While the recent correction may spook some investors, BTG reinforces its positive view of the payment machines🇧🇷
“We don’t see any fundamental reason for the sharp correction other than the deterioration of the overall market. In fact, we haven’t even seen a significant change in the management’s discourse”, say analysts Eduardo Rosman, Thiago Paura, Ricardo Buchpiguel and Vitor Melo, in a report published this Friday (9).
The quartet recognizes that the POS (total volume of payments) is slowing down due to deflation, but it highlights that Cielo increased its TPV in the fourth quarter by an average of approximately 13% quarter on quarter over the last four years.
“This year, we expect it to grow a little less (~8% q/t) due to the negative impacts of the World Cup and a weaker than expected Black Friday”, comment the analysts.
Regarding costs and expenses, the expectation is that they will increase, but largely due to the company’s digital and operational transformation phase. Despite the expected growth, BTG estimates that costs and expenses will continue to grow below the TPV, but above inflation.
Valuation remains attractive
Cielo is still on track to be the highlight of the Ibovespa in 2022, currently accumulating gains of more or less 100%.
Even with the strong appreciation, Cielo remains attractive, says BTG.
“We still believe that Cielo can deliver a net income of around BRL 2 billion in 2023. If this is true, CIEL3 would be trading at a very attractive P/E (price over earnings) of 5.7 times for 2023, which seems like a great entry point”, evaluates the bank.
BTG reiterated its buy recommendation, with a target price of BRL 7 at the end of 2023, also citing the low correlation with local political noise.
“We still see it as a great stock to own, at least in the short term,” the analysts conclude.
Source: Moneytimes
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