Shares of Uruguayan financial technology (fintech) specialist Dlocal (NASDAQ:DLO) initially soared 50% on Wednesday before paring down gains to around 36% up. Undergirding the robust enthusiasm was a C-suite pickup; specifically, former MercadoLibre (NASDAQ:MELI) CFO Pedro Arnt will step in as Dlocal’s co-CEO, effective immediately. Significantly, the turning of the tables helped DLO stock amid challenging circumstances.
According to a Barron’s report, Dlocal posted solid results for its second quarter. The company delivered earnings per share of 15 cents, rising against the year-ago quarter and beating the consensus target of 13 cents. In addition, revenue came in at $161.1 million, which also represented a lift from Q2 2022. This also exceeded Wall Street’s estimate of $149.4 million.
Notably, management reaffirmed its full-year guidance. However, while many market observers acknowledged the positive print, they focused on Dlocal’s upgraded senior management roster. “It certainly wasn’t as if Pedro needed a job, so his presence here should help abate concerns about DLO governance,” wrote Susquehanna analysts.
Subsequently, the market experts maintained their “positive” rating on DLO stock. Further, they raised their price target to $24 from $18. Against Tuesday’s close of $15.50, the new forecast implies growth of nearly 55%.
DLO Stock Attempts to Shift the Narrative
Fundamentally, the resurgence of DLO stock couldn’t come at a better time. With the midweek session’s dramatic swing up, DLO entered positive territory for the year so far. Further, the move may spark investor confidence which was shattered by ugly controversies.
Most notably, short-selling research firm Muddy Waters declared in November 2022 that it was short DLO stock. According to its press release, Muddy Waters conducted research that points to Dlocal possibly being a fraud. Additionally, the hedge fund also disclosed concerns over the fintech’s disclosures about and controls of client funds.
Per a December 2022 article by Reuters, the short seller doubled down on allegations of Dlocal’s balance sheet discrepancies. It stated that it was “more convinced than before” that the fintech used client funds to pay a special dividend to shareholders from before its initial public offering (IPO).
If that wasn’t enough to cloud DLO stock, Bloomberg reported that Dlocal faced an investigation of its operations by the Argentine government. In June, the company stated that it would invest $100 million in Argentina following a “constructive engagement” with the country’s federal authorities.
Over the trailing one-year period, DLO stock finds itself down around 31%.
Why It Matters
Even with Susquehanna’s positive assessment, analysts within the past three months have a pensive view on DLO stock, pegging it a “hold.” This assessment breaks down as one “buy,” two “holds” and two “sells.” Overall, the average price target lands at $15.60, implying a 25% downside risk.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
