Shares of financial technology (fintech) company DLocal (NASDAQ:DLO) got hammered on Friday after the company reported financial results for the fourth quarter of 2024. The Uruguayan company's take rates are falling, unsettling investors. And that's why DLocal stock was down a crushing 32% as of 2:50 p.m. ET.
DLocal's financial results fell short of expectations
Investors who like growth likely enjoyed reading parts of DLocal's Q4 report. The company's total payment volume was up an incredible 45% in 2024, including a 51% year-over-year jump in Q4. This volume growth allowed its Q4 revenue to grow by 9% to $205 million and its Q4 net income to increase by 4% to nearly $30 million.
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Observant investors will notice a steep drop-off in the growth rate for payment volume and revenue. And this is because DLocal's take rate -- the amount of a transaction that it gets to keep -- is falling. The take rate was around 1.2% going into the quarter, but in Q4 it dropped to 1.1%.
This small drop worries investors because of what it could imply. DLocal allows merchants to accept international payments in local currency, and investors are nervous that other fintech players can outcompete. The declining take rate could suggest competitive pressures.
Moreover, in the third quarter DLocal's management had said that its take rate was stabilizing. Therefore, the Q4 dip was also somewhat unexpected and contributed to the big drop with DLocal stock today.
What's next for DLocal?
For 2025, DLocal expects ongoing stellar growth in payment volume with a 35% to 45% growth rate, which is great. But it only expects revenue growth of 25% to 35%, implying even more of a slip in the take rate.
For investors who believe that DLocal can outcompete rivals, this is interesting. The stock trades at a cheap valuation given its projected 25%-to-35% growth. And the lower take rate could simply be indicative of working with higher-volume customers, not necessarily competitive pressures. If that's true, then DLocal stock could be positioned for better returns in 2025 after today's drop.
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Jon Quast has no position in any of the stocks mentioned. The Motley Fool recommends DLocal and recommends the following options: long January 2027 $7 calls on DLocal and short January 2027 $10 calls on DLocal. The Motley Fool has a disclosure policy.
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