PagSeguro Favored Over Buffett-Backed StoneCo at Credit Suisse

(Bloomberg) -- PagSeguro Digital Ltd was upgraded two notches to outperform at Credit Suisse as high growth and an attractive multiple have made it the bank’s top pick in fintech.

PagSeguro “combines a promising long-term outlook and a strong EPS growth,” analysts led by Daniel Federle wrote in a report from July 21. The company is also more shielded from the ongoing competition in the payments sector, according to the analysts, who raised their price target to $60 from $25. The shares rose as much as 6.1% to $48.43 in New York, a new record high.

According to Credit Suisse, PagSeguro shares reflect only a “very small portion“ of the potential upside from its digital bank, PagBank. “We have a very positive view on PagBank’s chances of becoming a relevant bank for micro-business owners and their families,” the analysts said.

StoneCo Ltd, which is backed by billionaire Warren Buffett’s Berkshire Hathaway Inc., was upgraded to neutral from underweight due to a “fair balance” of risks. While StoneCo is most affected by competition, its tech background and ability to innovate should allow the firm to adapt to industry changes, Credit Suisse said. The price target was raised to $36 from $20.

Brazil’s biggest payments company, Cielo SA, had its price target cut to 6 reais from 9 reais. Credit Suisse kept an underperform on the stock due to its negative earnings momentum and lower chances of becoming a platform of digital services. In late May, Cielo withdrew its net income forecast for 2019, without establishing new estimates.

To contact the reporter on this story: Vinícius Andrade in São Paulo at vandrade3@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Catherine Larkin

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