Why dLocal stock is down today

stock dLocal (water -17.49%) Shares of the Uruguay-based fintech company plunged 17.5% on Tuesday after it reported weaker-than-expected quarterly results.

DLocal’s “outstanding” results weren’t enough.

Fourth quarter 2023 revenue increased 59% year-over-year to $188 million, translating to adjusted (non-IFRS) net income of $40.6 million, or $0.14 per share. On average, analysts modeled slightly higher adjusted net income of $0.15 per share, but lower revenue of $173.2 million.

dLocal’s results show that total payment volume (TPV) in the fourth quarter increased 55% year-over-year to $5.1 billion, and the company’s net revenue retention rate was a strong 149%.

CEO Pedro Arnt said: “We are proud to share the incredible results we achieved in 2023. Despite testing the market and facing macro challenges, our team continues to execute our strategy, invest with discipline, and support our sellers in everything we do. I put it at the center of my work.”

What’s next for dLocal shareholders?

Looking ahead to 2024, dLocal expects TPV to grow between $25 billion and $27 billion, or 40 to 50 percent compared to 2023. The company also called for 2024 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in that range. It is $220 million to $260 million, a 10 to 30 percent increase from last year.

This adjusted EBITDA guidance range represents approximately 70% of StoneCo’s projected 2024 gross profit. This is below the “medium-term” guidance target of at least 75% for the indicator. Management said the temporary deviation from its profitability target was the result of a conscious effort to invest in its technology, operations and sales teams to “prepare the business for sustainable long-term growth.”

That’s music to my ears as a long-term investor. Assuming dLocal can translate these investments into good operating leverage beyond 2024, we think this pullback could be an excellent buying opportunity.