DLocal Limited (DLO): A Bull Case Theory

We came across a bullish thesis on DLocal Limited on Pierce Capital Research’s Substack by Steve Wagner. In this article, we will summarize the bull’s thesis on DLO. DLocal Limited's share was trading at $11.16 as of June 24^th. DLO’s trailing and forward P/E ratios were 23.25 and 19.88, respectively, according to Yahoo Finance.

DLocal (DLO) delivered its strongest quarter ever in Q1 2025, driven by record transaction volumes and robust profitability. Total Payment Volume surged 53% YoY to $8.1B, helping revenue grow 18% despite a decline in take rates. The company expanded gross margins to 39.2%, up from 34% a year ago, and significantly scaled operating leverage, with Adjusted EBITDA up 57% and net income more than doubling. Local’s mix of cross-border transactions improved, while disciplined cost growth led to margin expansion.

Constant-currency revenue growth of 36% highlighted the underlying momentum, even as FX volatility in markets like Argentina and Nigeria weighed on USD-reported figures. Merchant partnerships deepened with firms like Temu, Rappi, and Zepz, further solidifying dLocal’s value proposition in pay-in and pay-out use cases.

LatAm remained the primary growth engine, though Brazil’s take rates declined due to a shift to a payment orchestration model. Africa and Asia also saw volume growth, but profitability was impacted by FX and higher costs. The company declared a $0.525/share dividend ($150M total), reflecting management’s confidence in cash flows and profitability.

With a 27% Adjusted EBITDA margin and a healthy free cash flow profile, DLO now balances growth with shareholder returns. While risks such as yield compression, competitive intensity, and EM currency volatility remain, the company’s scale, sticky client relationships, and improving financials support a fair value estimate of $14–$15/share.

At current levels near $11–$12, the stock appears modestly undervalued, offering upside potential if the company sustains its execution trajectory in an increasingly competitive fintech landscape.

Previously, we covered a bullish thesis on DLocal Limited (DLO) by Oliver | MMMT Wealth in March 2025, which highlighted the company’s strong positioning in emerging markets and long-term growth potential. The company’s stock price has appreciated by approximately 15% since our coverage. This is because the thesis played out. Steve Wagner shares a similar view but emphasizes improving profitability and execution.

DLocal Limited is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 14 hedge fund portfolios held DLO at the end of the first quarter, which was 19 in the previous quarter. While we acknowledge the risk and potential of DLO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.

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