Outlook for Brazil’s VTEX Brightens With ‘Room to Grow’, No Regrets Over IPO

CEO Mariano Gomide says the Brazilian software company’s IPO timing was right, as if it had been five months later, ‘the market may have already reversed’

Analysts at Credit Suisse believe VTEX is accelerating fast and expect a strong first quarter
April 29, 2022 | 06:40 PM

Bloomberg Línea — Reflecting the recent increase in interest rate expectations, Credit Suisse has adjusted estimates for first-quarter technology balance sheets and adjusted long-term estimates, taking a more conservative approach to margins.

In a report released on Friday, analysts Daniel Federle and Victor Ricciuti upgraded Brazil-based software company VTEX’s (VTEX) rating to “outperform”.

Previously, VTEX’s anking was “neutral”.

“We have a very positive structural view of VTEX and and our former neutral rating was based on the lack of growth momentum in mid-2021, that we believe has now been overcome.”

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Federle and Ricciuti assess that the lack of interest has made technology stocks cheap, with investors showing a very low appetite for companies that are performing at a loss or not reporting substantial profits in the near term. Analysts believe this lack of interest has created distortions and led to companies such as VTEX becoming significantly cheap, with upside potential exceeding 50%.

“While it is difficult to predict precisely when investors will look at longer-duration tech stocks again, we highlight that, in addition to attractive valuations, we expect the Brazilian tech companies present inflation-hedged business models and we expect them to deliver strong results in Q1 and throughout the year,” they write.

From an operating momentum standpoint, the analysts believe that TOTVS will be the Brazilian tech company that will deliver the strongest result in the first quarter, followed by VTEX, which should see a further acceleration in sales and revenue growth, “probably topping guidance,” the analysts say.


Federle and Ricciuti consider VTEX to be accelerating fast and expect a strong first quarter.

“EBITDA will likely break even as early as Q4 2023. The upside potential remains solid at 50%. Any potential frustration related to VTEX’s global expansion is a major risk,” they say. During VTEX Day this month, the company’s CEO Mariano Gomide said the company sees a lot of room to grow in the U.S. and Europe and recently opened an office in Singapore.

VTEX’s first-quarter results will be released on May 12.

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“IPO at the right moment”

Asked by Bloomberg Línea in an interview during VTEX Day about the company’s IPO in July 2021, Gomide said the PO was done “at the right time”.


“We planned the IPO for four years and accessed the market at a good time.”

Gomide believes the IPO brought a “stamp” to VTEX. “You go as a private company to the United States and knock on customers’ doors and say you are a company with Latin American origins. There is a lot of bias. If you are a company listed on the NYSE they look at you differently because we are under the curatorship of a cradle of investors. Three years ago people who hired VTEX undertook three months of due diligence about who VTEX is, and who the owners of VTEX are. Today the duo diligence takes three days because VTEX is a public company. The reason for the IPO was to position VTEX to the world on one of the biggest stages that exist in terms of communication. We caught a wonderful market moment, maybe if we had done it five months later the market would have already reversed.

Gomide said that the founders of VTEX still control more than 37% of the company. “This shows that we are here for the long term”, he said.


Geraldo Thomaz, founder, and co-CEO of the company told Bloomberg Línea during VTEX Day that the current moment is very volatile and the cost of financing has certainly increased for those who need to finance themselves in the short term.

“In our case, VTEX has been doing this [software] product for 10 years practically self-funded. We’ve been profitable for many years, we imagine that in a scenario that stretches out, we’ll be able to react fairly quickly so that this volatility doesn’t affect our business in the long term.”

Looking at the other side of the coin, Gomide said that in a world where there is less liquidity in emerging countries, the company has to make itself worthwhile in the operation, where Latin American founders are very good.

“The United States is more competitive, with more access to that capital in this equity funding game of issuing shares, raising rounds, and investing in the company. In a world where there is no such liquidity, the company has to make itself worthwhile in the operation. And in this, we are very good, not only VTEX but this whole ecosystem here was forged to survive in conditions that the outside world never saw.”