10 Worst Affordable Tech Stocks to Buy According to Short Sellers

2) DLocal Limited (NASDAQ:DLO)

Short % of Float (As of 30 August 2024): 20.12%

Forward P/E as of 23 September 2024: 13.95x

DLocal Limited (NASDAQ:DLO) operates a payment processing platform worldwide.

The short sellers believe that the shares of DLocal Limited (NASDAQ:DLO) are expected to be impacted by the challenges related to the potential for merchant renegotiation, required investments, and volatility in specific markets where the company operates, primarily Argentina and Nigeria. They believe that the company’s business was also impacted by the risks stemming from currency devaluation, mainly in markets such as Nigeria and Argentina. Also, DLocal Limited (NASDAQ:DLO)’s exposure to geopolitical risks might impact its stock price in the short term.

That being said, experts believe that DLocal Limited (NASDAQ:DLO)’s growth trajectory should stem from the addition of new merchants and expansion in various verticals. Wall Street estimates that despite facing currency devaluations and repricing by a major merchant, DLocal Limited (NASDAQ:DLO) was able to maintain stable net take rates. Moreover, the company’s ability to navigate complex regulatory and technological challenges in emerging markets should continue to act as a key differentiator from the competitors.

As of June 30, 2024, it had US$531.6 million in cash and cash equivalents, which includes US$186.2 million of own funds and US$345.4 million of merchants’ funds.

The long-term outlook for DLocal Limited (NASDAQ:DLO) stems from its focus on TPV growth and increasing share of wallet. Also, Wall Street is optimistic about its recent partnership with Microsoft. By offering localized and flexible payment solutions, the company plans to ensure that Microsoft’s customers in emerging markets have access to efficient payment methods.

As per Wall Street, the shares of DLocal Limited (NASDAQ:DLO) have an average price target of $10.20. Notably, 19 hedge funds, out of 912 tracked by Insider Monkey at the end of 2Q 2024, held stakes in the company.

Polen Capital, an investment management company, released its second quarter 2024 investor letter. Here is what the fund said:

“DLocal Limited (NASDAQ:DLO), a payments processing company headquartered in Uruguay saw further weakness after reporting disappointing first quarter results. While payment volumes and revenues grew 49% and 34%, respectively, in 1Q 2024, gross profit only grew 2% due to elevated processing costs. The company has also invested more in building out its scale and functionality, which further weighed on profitability. Longer term, as one of the leading emerging markets payments processing companies, we believe dLocal can continue to see attractive growth and improve profitability under a highly-regarded management team.”