The environment of fierce competition and increased expenses to expand the operation has placed strong pressure on the so-called machine companies — which technically form the acquiring sector and act as a means of payment for commercial establishments.
The sector has suffered in different countries especially with high inflation, which forces central banks to signal the beginning of tightening fiscal and monetary conditions. The high competition environment provided by American big tech and large retail chains has also been penalizing technology companies that are still in the process of consolidating in the market.
In Brazil, the increase in interest already underway and its consequent impact on the expenses of commerce and services companies, which use the system on a massive scale, as well as the advancement of other payment alternatives, such as Pix, and entry new companies in this sector, such as Magazine Luiza, which launched MagaluPay.
India’s shares in the financial technology sector Paymt, for example, have tumbled around 30% since going public last week on the India Stock Exchange, with investors wary of heightened competition and the possible impacts that higher interest rates will bring to corporate profits in the segment.
The American Fiserv, partner in Caixa’s machine in Brazil, registers 11.7% retraction in the year on Nasdaq.
The shares of Stone, PagSeguro, Cielo and Getnet that operate in Brazil are also under intense volatility, following the release of balance sheets for the third quarter that brought results below expectations and raised doubts about the future performance of the businesses.
In the year, Stone’s shares have already fallen 79.6% on Nasdaq, where the shares are listed. The shares of PagSeguro PagBank, which belongs to Grupo UOL –which has a minority and indirect stake in Grupo Folha, which publishes Folha–, accumulates a 51.2% retraction on the NYSE (New York Stock Exchange).
Listed on the B3 in Brazil, Getnet has a drop of 65% in the year and Cielo, of 45.7%.
In the accumulated result from January to Wednesday (24), the shares of this group, together, have already lost around R$ 160.9 billion in market value, according to data from Bloomberg. The biggest drop is for Stone, of approximately R$ 104 billion, followed by PagSeguro, with a drop of R$ 47 billion in market value in the period.
The increase in the Chinese government’s regulation of the country’s technology companies has also contributed to cloud the assessment of experts when it comes to analyzes of this segment at an international level.
According to a Reuters report published on Wednesday, Warburg Pincus, a major global investor in the Ant Group, has revised the company’s value down. Chinese fintech would be worth 15% less, around US$ 200 billion (R$ 1.12 trillion). The manager took into account the risks of a business restructuring.
Last week, another Chinese giant, e-commerce group Alibaba, lowered its annual revenue forecast, saying the business was suffering from increased competition and regulatory repression.
Alibaba now expects revenue to increase between 20% and 23% by March next year, the slowest pace since its debut in the stock market in 2014, and below the projection made in May, which established growth of 29 .5%.
Last week, Stone reported adjusted net income of BRL 132.7 million for the third quarter of 2021, a drop of 53.9% on the result of a year earlier.
Analysts expected, on average, net income of BRL 193 million. The company’s shares fell 34.6% in the trading session following the release of the results in response to reported numbers.
“The results [da Stone] create additional uncertainty as to when the business will recover,” wrote analysts at Goldman Sachs.
Growing competition that pressures business margins, higher-than-expected expenses to expand the operation and difficulty in gaining market share are among the risks cited by analysts at the American bank for the evolution of Stone’s operations in the coming months.
Even in the case of Cielo, which saw its profit more than double in the third quarter, specialists’ view also points to greater caution.
“Although marginally positive, the results for the third quarter of 2021 [da Cielo] do not change our view that the company faces a difficult competitive scenario that will become even more fierce in the coming months, as the increase in the cost of funding caused by the increase in interest rates forces acquiring companies to readjust their rates to maintain profitability”, said the analysts of Itaú BBA about the acquirer controlled by Banco do Brasil and Bradesco.
Last week, the founder and chairman of the board of directors of PagBank PagSeguro, Luiz Frias, said that the uncertain prospects for the growth of the Brazilian economy in 2022 should not have a big impact on digital businesses that have been benefiting from the increase in digitalization in habits of the population.
“The company [PagSeguro] it has grown around 50% per year in recent years, and macroeconomic discussions do not affect our operation that much,” said the executive during PagSeguro Day, adding that the company should deliver new growth in the region of 50% in 2021.
(With international agencies)
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