StoneCo’s Dip Still Looks Tempting

Summary:

  • Despite underperformance, StoneCo’s stock is undervalued with promising unit economics and expected EPS growth, justifying a bullish rating.
  • Q2 2024 results showed strong performance in payments, banking, and credit segments, with significant revenue and EPS growth.
  • Management’s efficient capital deployment and ambitious growth targets suggest potential for substantial profitability and market penetration.
  • Despite competition and macroeconomic headwinds, StoneCo’s stock is poised for a 20.8% upside, trading at a discount to its fair value.
  • I’m reiterating my “Buy” rating for the STNE today.

Map of western hemisphere highlighting South America

Adam Gault

Intro & Thesis

I initiated coverage of StoneCo Ltd. (NASDAQ:STNE) on August 12, 2023, when the stock was trading at $13.52 and since then, STNE has moved in a wide trading range, occasionally trying to move higher


Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in STNE, over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.


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