J&J is on the rise, but this Fintech stock is falling hard
There’s been a lot of volatility in the stock market lately, so many investors seem happy when they get the chance to take a break. Things appeared to be relatively calm on Wednesday morning, as stock index futures were close to unchanged across the board. Many market participants are awaiting more economic data, and the imminent start of earnings season next week will add a new perspective for those looking for direction in the stock market.
As a member of Dow Jones Industrial Average, Johnson & Johnson (JNJ 1.05%) receives a lot of attention from the investor community, and therefore a noticeable increase in the share price attracted attention on Wall Street early Wednesday. However, shares of the fintech disruptor DLocal (DLO -2.48%) fell sharply after the company reported financial results that did not meet expectations.
J&J appears to be moving on from litigation
Shares of Johnson & Johnson rose nearly 3% in premarket trading Wednesday morning. The healthcare giant took a big step toward trying to resolve potential liability that has been a thorn in its shareholders’ side for some time now.
Johnson & Johnson announced late Tuesday afternoon that its subsidiary LTL Management had filed for Chapter 11 bankruptcy protection. In doing so, LTL intends to seek approval for a reorganization plan that will resolve all claims related to cosmetic talc product claims.
J&J has been down this road before, but it significantly increased the settlement offer. Specifically, Johnson & Johnson agreed to contribute up to $8.9 billion, payable over a 25-year period, to resolve all current and future claims related to talc products. That’s up from just $2 billion when LTL first filed for bankruptcy protection in October 2021. LTL believes this plan has a much better chance of success, as it has secured commitments from more than 60,000 potential plaintiffs in support of entering into a settlement.
It’s unclear whether Johnson & Johnson’s legal argument supporting LTL’s second bankruptcy filing will address the concerns raised by the U.S. Third Circuit Court in dismissing the original bankruptcy case, but the company seems hopeful that it has addressed those concerns. In any case, shareholders are happy about the prospect of getting this potentially costly and lengthy process of addressing talc claims behind them, which led to the rise in the share price today.
DLocal puts its head down
Shares of DLocal were lower by 10% in pre-market trading. The Uruguay-based payments company reported fourth-quarter financial results that showed continued growth, but at a slower pace than many investors had wanted to see.
On their face, DLocal’s numbers looked strong. Full-year 2022 payment volume rose 75% year-over-year to $10.6 billion, and the company brought in $419 million in revenue, up 72% from 2021 levels. DLocal boasted a net revenue retention rate of 165%, demonstrating that existing customers are increasingly committed to using the company’s payment platform.
DLocal has high hopes of expanding beyond its home territory of Latin America to serve other geographic areas. Revenues from sources in Africa and Asia quadrupled from 2021 levels and now represent close to a fifth of DLocal’s overall worldwide sales. Moreover, the company expects 2023 to be strong as it maintains its upward momentum and scales up its business model.
However, the numbers did not appear to allay concerns among investors, particularly those raised by noted short-selling researcher Muddy Waters in November. Although the stock has rebounded significantly from the big loss following the release of the Muddy Waters report, it has not fully recovered and it may take longer for DLocal to fully restore shareholder confidence.
