Shares of payment platform DLocal (DLO -31.38%) were down 29% this week at 12:30 p.m. ET, according to data provided by S&P Global Market Intelligence.
DLocal reported fourth-quarter earnings on Thursday and missed analysts’ expectations for sales and earnings per share. While its guidance to grow total payment volume (TPV) by 40% in 2025 is promising, the company and its shorter-term profitability woes worried the market.
High-speed growth, but at what cost?
DLocal’s payment platform solves for the complexities of trying to sell anything in an emerging market. Offering over 900 payment options in roughly 40 countries, DLocal boosts its customers’ conversion rates in emerging markets, home to over 2 billion people.
The company’s platform is a no-brainer solution for some of the world’s largest companies, such as Amazon, Shopify, Netflix, and Spotify. Growing alongside juggernauts like these, DLocal again delivered impressive TPV growth of 45% in Q4 — even if this was below expectations.
However, the company’s declining margins and take rate were the bigger concern. Although TPV was up 45% in Q4, revenue and gross profit only rose 15% and 6%, while adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) declined by 7%.
Similarly, the company’s take rate (gross profit divided by TPV) slipped from 1.2% in Q3 to 1.1% after it had remained flat (an improvement) over the last three quarters.
In oversimplified terms, the volatile nature of operating in emerging economies can lead to short-term disappointments like this for DLocal.
What’s next for DLocal?
Ultimately, DLocal remains a profitable enterprise that generates positive free cash flow and will likely see continued TPV growth. Trading at 24 times earnings today and 16 times next year’s earnings, DLocal remains one of my favorite growth stocks.
Interested investors will need to brace for volatility with this one, however.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Josh Kohn-Lindquist has positions in DLocal, Netflix, and Shopify. The Motley Fool has positions in and recommends Amazon, Netflix, Shopify, and Spotify Technology. 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.
