StoneCo (STNE) holds 11.3% of Brazil’s fintech market share and is set to capitalize on Brazil’s favorable economic dynamics. Despite challenging market conditions, the company demonstrates a promising future. The company’s recent quarterly results showcased robust financial health, with top-and-bottom-line beats. Meanwhile, the company has also excelled in cost management, effectively controlling its service costs and reducing administrative expenses. StoneCo’s rapid growth, strong financial performance, and cost optimization strategies make it an attractive option in the emerging fintech market.
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StoneCo’s Showing Substantial Progress
StoneCo provides financial technology and software solutions for electronic commerce in Brazil. Its technologies are primarily distributed through proprietary Stone Hubs, which provide hyper-local sales and services.
Stone has shown substantial progress across various strategic focuses, progressing toward its 2024 and long-term goals. The cross-selling initiative to software clients, especially in the gas station and retail verticals, has shown promising results, increasing card TPV growth.
In Financial Services, the company’s MSMB Card TPV recently demonstrated a 17.4% year-over-year gain, representing an ongoing market share increase within the segment. StoneCo has grown to 2.7 million active banking clients in the banking sector and accrued R$6.5 billion in deposits. As part of its banking solution advancements, the company has launched pilot interest-bearing products like time deposits to better serve its clients. Its credit portfolio grew to R$712 million through Q2, which aligns with expectations.
StoneCo’s Recent Financial Results & Outlook
The company recently reported results for the second quarter of 2024. Revenue climbed by 8.5% to R$3,205.9 million, primarily due to a 10.6% year-over-year surge in financial services revenues triggered by consistent active client base growth and increased client monetization. Adjusted EBITDA rose by 5.9% year-over-year to R$1,587.2 million, with the adjusted EBITDA margin sequentially rising from 49.0% to 49.5% due to consolidated revenue growth and lower selling expenses.
Adjusted Net Income soared by 54.4% year-over-year to R$497.1 million, with the adjusted net margin at 15.5% compared to 14.6% in 1Q24. Earnings per share (EPS) saw a 57.2% increase, culminating in R$1.61.
Following the promising Q2 results, STNE’s management has offered 2024 guidance, projecting an increase in MSMB CTPV (Card TPV) of 18% and client deposit growth of 65%. The credit portfolio is anticipated to grow more than 2.6 times with an MSMB take rate of 2.54%. Further, the company is looking for a reduction in adjusted administrative expenses of 12% and a substantial increase in adjusted net income of 70%.
What Is the Price Target for STNE Stock?
The stock has been range-bound the past few years, with an 8% return over the past year. It trades near the middle of its 52-week price range of $9.34 – $19.46 while showing mixed technical indicators, such as bullishly trading above its 20-day (12.82) moving average while still trading below its 50-day (13.54) moving average.
Analysts following the company have taken a cautiously optimistic view of STNE stock. For instance, Morgan Stanley (MS) analyst Jorge Kuri recently reiterated a Hold rating on the stock with a $16.50 price target, noting robust EPS growth forecasted in 2024 while highlighting currently challenging market conditions and potential risks and opportunities facing the company in the near to mid-term.
StoneCo is rated a Strong Buy overall, based on ten analysts’ recent recommendations and price targets. The average price target for STNE stock is $18.28, representing a potential 37.86% upside from current levels.
StoneCo in Summary
StoneCo’s commanding position in the Brazilian fintech industry, robust financial performance, cost management strategies, and progressive strides towards its long-term goals make it a compelling investment in the emerging market fintech landscape. It demonstrated impressive recent quarterly results and commitment to cost optimization strategies, which signals an upward trajectory. STNE is a potentially compelling option for those interested in an emerging market fintech growth story.
