1 High Growth Stock Ill Keep Buying This Year Before It Explodes

DLocal: A Fintech Multibagger in Emerging Markets [00:00]

• DLocal is presented as a high-quality fintech company operating in emerging markets, specifically the Global South, with a market capitalization of $4 billion.
• The company's CEO, Pedro Arn, has a distinguished background, having served for over 23 years at Mercado Libre, including a significant tenure as EVP and CFO.
• DLocal's trading multiples are noted as a P/E of 28.6 times and a forward P/E of 19 times, with a PEG ratio of 0.9, indicating profitability and expected rapid growth.
• The company is projected to grow its top and bottom lines compounded for the next two years, a significant feat for a $4 billion market cap entity.
• The broader economic context highlights that more than two-thirds of global growth over the next decade will originate from emerging markets.

"Why invent mediocrity when you can copy genius?"

Financial Performance and Strategic Outlook [02:57]

• In the most recent quarter, DLocal reported TPV, revenue, and adjusted EBITDA all growing above 50% year-over-year, with TPV at 53%, revenue at 50%, and adjusted EBITDA at 64%.
• Gross profit also saw a substantial increase of 42% year-over-year.
• Net income experienced a year-over-year and quarter-over-quarter decline, attributed to the Argentine peso devaluation and related expatriation costs.
• The company has actively reduced its Argentinian bond position by over 80%.
• Free cash flow showed robust growth, up 156% year-over-year and 22% quarter-over-quarter.
• Past concerns about declining take rates are being offset by consistent TPV growth, leading to increasing gross profit dollars.
• Management expressed confidence in sustainable TPV growth due to the vast addressable market and diversified growth vectors, expecting it to offset take rate compression and lead to healthy gross profit dollar growth.
• DLocal anticipates adjusted EBITDA to gross profit margins potentially reaching or exceeding 75% in the midterm.
• Increased scale and diversification are expected to smooth out the impact of country-specific weaknesses, such as an anticipated slowdown in Egypt.

"These are the steps that we've taken and we think that the business will continue to grow and grow in a very profitable way as well."

DLocal's Competitive Edge and Market Positioning [06:06]

• DLocal is described as a middleware layer connecting global companies with local payment systems in emerging markets.
• Its primary competitive advantage is operational excellence in navigating the complex and varied payment ecosystems of these regions, which often include cash, digital wallets, and local systems alongside credit cards.
• The company is exploring the use of blockchain, specifically stablecoins, for cross-border settlements and employing AI to enhance internal operations.
• DLocal positions its single API as a horizontal solution, unlike vertical solution providers like Adyen or Stripe, enabling it to work across diverse markets for global clients like Netflix and smaller companies in Africa.
• CEO Pedro Arn's investment perspective for the Global South is long-term, emphasizing favorable demographics, population growth, and technology adoption curves as drivers of growth, contrasting with short-term market pessimism.

"He views of course the one D local API which is just one API as a not a vertical integration type of company like a ADON or should I say vertical solution company like an ADON or a stripe. They're seeing themsel as a horizontal one."

Financial Projections and Investment Thesis [07:59]

• Pedro Arn predicts significant consolidation in the fintech space over the next 5 years, with many companies disappearing.
• DLocal's growth strategy may involve strategic acquisitions, though merging technology stacks and company cultures is acknowledged as challenging.
• The company's core value proposition is providing a single, simple integration for merchants, granting them access to multiple countries without a complicated user experience.
• Despite recent stock volatility, including a pullback after a secondary offering, the stock has shown resilience, with the presenter viewing it as a "buy the dip" opportunity.
• DLocal is projected to generate over $1 billion in revenue for the current fiscal year and $1.5 billion by fiscal year 2027, with continued growth expected.
• Starting next year, the company plans to use a portion of its free cash flow to pay a dividend.
• The presenter expresses strong conviction in DLocal as a "gem" due to its market cap, growth rate, profitability, leadership, and favorable market tailwinds.

"And so right now looking at the stock of course after the last earnings report stock shot up. We went to $16.50 or so. Then we've seen a pullback also after the secondary offering that happened. This was a buy the deep opportunity like there is no tomorrow."