StoneCo (STNE) Stock Forecast for 2024, 2025, 2026. Sell or Buy?

In this comprehensive review of the analytical financial article by Multiplo Invest, the author maintains a Neutral stance on STNE stock. Despite being a relatively new contributor since 2024, with an impressive 64 publications, the author's views resonate with a growing audience, evidenced by 411 subscribers. While the overall credibility might not be classified as high, the author's consistent output and dedication to financial analysis provide valuable insights. This pattern suggests a commitment to delivering thoughtful and balanced perspectives, making the article a worthwhile read for those seeking a nuanced understanding of STNE stock's potential trajectory.

Key Theses of the Review

• StoneCo's 2Q24 results showed an 8.5% YoY revenue increase.
• Increased costs and higher NPLs raise concerns about future profitability.
• StoneCo's stock has a 7% discount to the sector's average P/E.
• The company managed a 54% YoY increase in net income.
• Challenges in monetizing customers evidenced by a 12.6% reduction in MSMB (Banking) ARPAC.
• The company's ability to manage rising costs and NPLs is crucial for future profitability.

Key Factors Affecting STNE Stock Price

StoneCo reported an 8.5% YoY increase in revenue. This sustained growth can drive investor confidence and positively impact stock prices.

The 22.8% rise in costs, including provisions for doubtful debts, can put sustained pressure on profitability. This could potentially lead to decreased investor confidence.

NPLs for 15-90 days and >90 days increased by 66 bps and 113 bps, respectively. This indicates potential future defaults, significantly impacting profitability and investor sentiment.

Net income increased by 54% YoY, highlighting StoneCo's ability to grow its bottom line. While this is positive, it is tempered by underlying cost and NPL concerns.

StoneCo's stock trades at a 7% discount to the sector's average P/E. This limited margin of safety may not be sufficient to attract higher investor interest.

A 12.6% reduction in MSMB (Banking) ARPAC indicates challenges in monetizing customers. This could pressure margins and impact long-term profitability.

Commentary

StoneCo's Q2 performance is a mixed bag, showcasing both potential and pitfalls. While the company managed to boost its revenue by 8.5% YoY and achieve a 54% increase in net income, rising costs and higher non-performing loans (NPLs) are significant red flags. In the short term, this dichotomy could mean moderate volatility for StoneCo’s stock, as positive net income growth might be overshadowed by investor concerns over increasing costs and potential defaults.

Looking ahead to the next month, the average influence strength of these factors appears quite balanced. Revenue growth and net income are positive indicators, but cost inflation and monetization challenges, evidenced by a 12.6% reduction in MSMB ARPAC, pose real threats to profitability. Furthermore, the 7% valuation discount to the sector's average P/E seems insufficient to offset these operational concerns. As a result, StoneCo’s stock might tread a neutral path, with its future performance hinging on how well the company manages these rising costs and NPLs.

Oakoff Investments' latest analytical financial article centers on a bullish perspective towards STNE stock. With 236 publications since joining in 2021, Oakoff Investments has rapidly become a respected voice in the financial domain. The author boasts a substantial following of 5,364 subscribers, underscoring the widespread interest and trust in their analyses. Furthermore, the credibility of their viewpoints is reinforced by a well-above-average authority, making Oakoff Investments' insights both reliable and influential. This review aims to delve into the key points of their optimistic stance on STNE, offering readers an informed look at the stock's potential based on expert analysis.

Key Theses of the Review

• StoneCo stock has shown significant underperformance over the past quarters despite overall market strength.
• StoneCo's Q2 results show impressive MSMB client growth, improved cost management, and potential for further buybacks to enhance shareholder value.
• A recovery trend may have already started in July 2022, with the nearest resistance target ~28% above the current price.
• Despite risks and market uncertainty, StoneCo remains a strong 'Buy' with growth potential and attractive valuation compared to peers in the fintech market.

Factors Influencing StoneCo's Stock Price

Adding ~185,000 new MSMB clients during Q2 2024, a YoY growth of 30%, indicates strong market penetration and client monetization potential, boosting revenue prospects.

The cost of services as a percentage of revenues decreased by 10 basis points QoQ, and administrative expenses also declined due to efficiency gains, positively impacting net income and profit margins.

The diluted share count outstanding is down ~7.9%, which can enhance shareholder value and improve EPS, making the stock more attractive to investors.

The working capital portfolio increased by 28% sequentially, and despite a slight increase in NPLs, the provision for expected losses decreased significantly, suggesting better credit risk management and growth in financial services.

Limited analyst coverage and meager earnings revisions suggest undervaluation, but also highlight potential risks related to market visibility and sentiment affecting the stock's performance.

The stock price is trying to stabilize above its 52-week moving average, with a potential recovery trend since July 2022 indicating short-term positive momentum and a resistance target ~28% above the current price.

Despite an expected EPS growth of 16.3% in 2026, StoneCo trades at a forwarding P/E ratio of 11.5x, suggesting it may be undervalued compared to peers like PagSeguro Digital, making it an attractive investment opportunity.

Commentary

StoneCo's recent Q2 performance showcases robust indicators that could drive its stock price upward in the near term. Key highlights include a notable 30% YoY increase in MSMB clients, translating to ~185,000 new clients, which underscores StoneCo's strong market position and revenue potential. Improved cost management, with a 10-basis-point reduction in the cost of services and declining administrative expenses, further bolsters its financial health. Additionally, strategic buybacks, reducing the diluted share count by nearly 7.9%, should enhance EPS and appeal to investors.

Analyzing market sentiment and technical factors, the stock appears undervalued, with limited analyst coverage hinting at overlooked potential. While the stock price is attempting to hold above its 52-week moving average, a brewing recovery trend since July 2022 suggests short-term momentum. When factoring in comparative valuation against peers, StoneCo's forward P/E ratio and expected growth figures present a compelling case. Combined with an average influence strength of 7.14 across multiple factors, the stock shows promising bullish trends for the next 15 days and beyond.