DLO is a 10x Opportunity Everybody Ignores
$DLocal Limited(DLO)$ is a 10x opportunity everybody ignores.
Transaction volume is skyrocketing, margins are stabilizing, and it's rapidly expanding into new markets.
Here is my full investment thesis: 🧵
2/ DLocal is a payment service provider that brings together many payment methods.
In developed countries, credit cards are the preferred payment method; in emerging markets, credit card penetration remains low.
This puts a drag on digital payments.
DLO solves this problem:
3/ DLocal integrates with local payment service providers.
This way, a merchant can accept Pix payments from Brazil, OXXO from Mexico, and Pago Efectivo from Ecuador, and many other methods through one API.
This way, merchants can effortlessly sell in many emerging markets.
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4/ It rapidly expanded its emerging market coverage recently.
It was active in 29 emerging economies at the time of its IPO back in 2021 and now it's active in 43 countries and counting.
It recently acquired licenses in Turkey, the Philippines, and the United Arab Emirates.
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5/ It grew total payment volume (TPV) by 60% annually since it became public in 2021.
Its TPV in 2021 was just $6 billion, now it's over $26 billion.
Result? Revenue skyrocketed.
Yet, it's just the beginning..
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6/ DLO benefits from double-sided network effects.
Merchants using DLO expand their addressable market as they can accept payments in local methods.
This attracts more merchants to the platform as they don't want to miss out on new market opportunities.
This increases payment volume, which again attracts more merchants as they want to take a share from a growing pie.
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7/ It has several tailwinds for growth.
Payment processing is a $173 billion market that is expected to grow 20% CAGR in the next 9 years and reach $914 billion in 2034.
Even if it takes a minuscule 1% share of this market, its revenue will increase 10x and reach $9 billion.
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8/ Emerging markets will also grow three times faster than developed markets in the next 5-10 years.
This means that payment volume in these markets will also grow faster than that of developed markets.
This will act as a direct catalyst for DLO.
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9/ Its balance sheet is rock solid.
Its equity pool is at 10x the size of its debt, and its annual EBITDA can easily pay all the debt on the balance sheet.
It can easily weather any economic downturn and keep thriving.
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10/ Valuation is extremely attractive.
Even if we assume it'll capture just 1% market share of global payments revenue in 2034, it'll generate $9 billion in revenue.
At 20% net margin, it will generate $1.8 billion in net income.
Attaching a conservative 15 times earnings gives us a $27 billion company, nearly 10x of today's valuation.
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- Rainy777·06-24A lot of competition in this space and it's likely there will only be a few winners.1Report